MARKET UP DATE AT GLANCE FEBRUARY 2009

 

The January thaw that occurred in our weather, UNFORTUNATELY, DID not also occur with the home buying and selling public. AS MENTIONED in the JANUARY update i BELIEVED the Billings/Yellowstone COUNTY real estate market WOULD have its challenges in 2009 and the first months numbers show that in spades.  Billings/Yellowstone county is following its tradition of lagging the united STATES ECONOMY, TRENDS, by its normal 12 to 18 months.

when you look AT ALL the numbers below they would without CAREFUL understanding of the PSYCHOLOGY INVOLVED and the underlying trends lead you to, like chicken little, to BELIEVE the sky is falling. i do not BELIEVE that is the case.  let me explain.

FIRST I do not minimize the slow down in sales and the increase inventory, YET AS i have stated previously the slowing in home construction is a POSITIVE in the market place because it reduces overall inventory, yet THAT DECREASE in new CONSTRUCTION sales also has an impact on sales price and size of homes that go it the mix of sales.

TRADITIONALLY new home sales are 20 to 30% higher in price than the resale market THEREFORE the absence of new home CONSTRUCTION has an immediate and DRAMATIC effect on average sales price. couple that with a DRAMATIC slow down in the $275,000 and up sales in the resale market and numbers change very RAPIDLY.

the two POSITIVE forces in the MARKET are the STRENGTH of the below $200,000 and no significant increase in FORECLOSURES of HOMES.

THE $200,000 and below STRENGTH is CAUSED, I BELIEVE, FOR two primary reasons #1 is unemployment in YELLOWSTONE IS SUB 4% COMPARED to the state average of 5.4% and the NATIONAL of 7.2% giving people who want to own their home a job and A BELIEF that they will be employed, along with HISTORICALLY low INTEREST, approximately 5% on a 30 year fixed rate, and you have a good case for buying a home if your intention is staying put three plus years. 

THE #2 POSITIVE IS NO SIGNIFICANT FORECLOSURE activity. the importance of this fact can not be UNDERSTATED. when you look at other market places AND THE case /shiller index declines, the driving force is FORECLOSED properties sold by lenders.

first and FOREMOST lenders do not want to own the PROPERTIES they have taken back. secondly the homes they have taken back USUALLY have condition issues, since it is rare that the person that loses a home has either the desire or cash to MAINTAIN THE home. THEREFORE, when the properties are sold they are sold at a discount to move them off the books and to minimize the EXPENSES of FIX UP and holding the PROPERTY.

with the above facts, REGARDING FORECLOSED PROPERTIES, you have huge downward PRESSURE on sales PRICE IN AREAS WITH a large FORECLOSURE inventory, since the home buyerS see FORECLOSED PRICING AND base DECISIONS on OFFERS OF COMPETING, noNE FORECLOSED properties on the pricing offered on the FORECLOSURES.  THEREFORE you see much lower offers on the non lender owned PROPERTIES creating the SIGNIFICANT DOWNWARD PRESSURE on PRICING.

without the FORECLOSURE activity and the reasons related to that ACTIVITY we in Billings/yellowstone county will see slight DECLINES in pricing due the slow DOWN in sales and the increase in INVENTORY, yet it will be nothing compared to the national number.

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