April 30^th 2013

As I sit and review the performance of the market for the first four months of 2013, the increase in in unit sales is outstanding, the decrease in market time is phenomenal, the increase in pending sales is a positive trend, the market velocity is a decreasing increase year over year in closed sales, this is one of the most positive actions within the market. The reason for its positive effect is the increase in unit sales becomes a sustainable momentum and not a setup for a bad stumble. The other positive from the market behaving in this manner is that the movement of prices up becomes a more solid base to build appreciation on. The market has experienced a 6% approximate pricing movement year over year, as we get further into the year and both sellers and buyers gain confidence in the economy of Yellowstone County as mentioned above the price gains become solid. In March of 2013 there 2214 more people working in Yellowstone County than in March of 2012 and 5942 more working than in March of 2011.The pricing trend will be interesting watch develop. With interest rates  9.6% lower than last March and with the  price movement, it is actually was cheaper to buy a home this April as compared to last April by $20 a month and $78 cheaper than in 2011. The other amazing factor is, to purchase the median price home your payment will $40 a month cheaper than renting the median priced home for rent, another distortion of the market place by the extremely low interest rates. I would have to believe we are very close to the end of that continue declining interest rate cycle, at some point in the near term the Federal Reserve will stop buying 85% of the mortgages originated in the United States. Then housing market will have to survive with money raised in the private market instead of the Federal Reserve printing the money. I hope you find the information both useful and enlightening, if you have any questions about either buying, selling or the market in general do not hesitate to call or email

Lots of different ways to look at the both the residential sales price market and the price of rentals and their relationship to each other

The 1^st graph shows the price differential between purchasing a home at the then current interest rate and price and renting an apartment in the Billings area

The 2^nd graph shows the payment trend at the sales price and interest rate at each year

The 3^rd graph shows average and median sales prices for each year

The 4^th graph shows the rent trends each year

Using the average interest rate for the last five years (4.57%) at this average sales price this year so far a house payment would be $1435 as opposed to $1286 with current interest rate (3.57%) if you use the average rate for a 30 year mortgage since 1971 (8.64%) at current sales price a house payment would be $2188

So the thoughts to ponder for the next twelve months

#1 do interest rates stay at the level they are and the cost of purchasing grow at whatever price appreciation occurs in the market place and how would that event affect the rental market?

#2 do interest rates and home prices both go up and how would that event affect the rental market?

#3 do interest rates trend back towards the 40 year average home prices remain the same, how would that event affect the rental market?

#4 is there such a creature as a “normal” market?

624 Terry Avenue

This is it!  Very clean, light & bright home with 2 bedrooms, 1 bath, basement area for future expansion, 2 car garage, fenced yard and patio

Lovely country property, set up for horses, fencing, corrals, riding arena, 6 bedroom, 3 bath home, 2 car garage, storage and more!  Just a few minutes from Billings too!

$158,750

3 bedroom, 2 bath home on permanent foundation, 2 car oversized garage, 1.16 acres irrigated

30 year pi median sales price 1985  $932---

30 year pi median sales price 2013  $1094

median earnings 1985 $17,88 44.79% of the income to  qualify for the payment

median earnings 2013 $39,936 85.18% of the income to  qualify for the payment

1519 Foothill Drive                                                  $228,600

Spacious living areas, large fenced yard, country atmosphere, located in the Alkali Creek area.

5+ bedrooms, 3 baths, 2 car garage, storage and more!

We are now two months into the year and the good numbers continue to roll through the housing market here in Yellowstone Count, Inventory lower by 18%, pending sales up by 16%, closed sales up by 24%, new home permits up 61% all outstanding performance for the residential market. The driver for most of this outstanding performance comes from three things interest rate and jobs and population growth.   First let’s talk about interest rates, the Federal Reserve through  buying mortgages and not selling any of previous mortgages has managed to drive and keep interest rates to historical lows, 9.3% below 2012 and 43.52% below where they were in 2006,which was the peak year in sales for Yellowstone County. From to December 2011 to December 2012 the Billings MSA added 1700 non-farm payroll jobs and population has increased approximately 1450 people. Lots of positives in the economy.

With all these positives, pricing structure is starting to change, from the first two months of 2012 to the first two months of 2013 by 3.5% to 4% year over year when you take size and price into the actual formulation of price change. When all the positives are taken into consideration, on first blush, that would seem a more than modest price increase than demand would indicate.  I have asked the question before and believe that the underlying reason is the same, caution on both the buyers and sellers within the market place. Yes sellers do want the highest price that they can achieve yet, they do want to sell, so while you might assume sellers interest are not aligned with the buyer at this point in the market place the assumption is most probably wrong. Just as you reverse the process and look from the buyer’s side and assume that the lowest value would be most wanted yet with a lower inventory being able to purchase the home and location wanted becomes more paramount. So with interest rates favorable buyers will move some in pricing of purchase yet not as much as positives would lead us to believe. We are now seeing an influx of buyers moving out of rentals into the market as purchasers, since the Yellowstone County economy continues in a positive direction with jobs being more secure. As always it’s fascinating to me to watch the market and how it operates with all the different forces involved. This year should be interesting to see of how the market responds

2110 Rosewyn Lane

$172,500

• : http://finance.yahoo.com/news/the-best-places-to-retire-in-2013-161036833.html 

1011 O'Malley Drive                                       $348,000

When you listen to press you would think that single family new construction Nationally had recovered and is humming along. So I thought it might be useful to see visual as well as number wise where single family new home has been, where it is, then look at the Billings market and compare.

1^st the graph below shows Nationally single family permits since January 1^st 2005, was the peak year in single family permits nationally.

#1 the peak was September of 2005, the single family permits were issued at the rate of 1,798,000 homes per year

#2 the bottom was January 2009 at the single family permits were issued at the rate of 337,000 homes per year

#3 the average number of permits for the fifty years before the peak, single family permits issued at the rate of 934,000 homes per year

#4 the latest report for January 2013, single family permits were issued at the rate of 584,000 homes per year

So doing some quick math it shows

#1 single family permits off 67.5% from the peak 2005

#2 single family permits off 37.47% from the fifty year average

#3 single family permits up 42.29% from the Bottom of 2009

So while an impressive bounce from the bottom, the question would be how would you be doing if? 

#1 your personal income was 37.47% below your lifetime average or

#2 your personal income was 67.5% below your highest year of earning

Based on the information above how would you answer

Is the National single family construction market healthy or is mired in recession (depression)?

With the discussion of the national single family construction market in your mind now we turn to Billings Montana and ask ourselves the same questions

1^st the graph below shows Billings single family permits since January 1^st 2005, 

#1 In Billings 2005, the single family permits were issued at the rate of 450 homes per year

#2 the bottom was 2011 at the single family permits were issued at the rate of 197 homes per year

#3 the latest full year report for 2012, single family permits were issued at the rate of 355 homes per year

#4 The February year to date 2013 report, single family permits were issued at the rate of 56 homes

So doing some quick math it shows #1 single family permits fell 56.22% from the peak 2005

#2 single family permits in 2012 still off 21.11% from the peak year

#3 single family permits up 44.22% from the Bottom of 2011

#4 single family permits up 31.03% when compared to the first two months of 2005

So now we ask similar questions, how would you be doing if in Billings?              

#1 your personal income in 2012 was off 21.11% from your highest year

#2 your personal income was starting 2013 up 31.03% from your highest year of earning

Based on the information above how would you answer the question?

Is the single family construction market in Billings healthy and is this similar to what a healthy national single family construction market would look like?

the numbers and comparisons below show how well the “recovery’ is actually performing you still see a 62% to 74% drop from the peak and 30% to 46% percent drop from the fifty year average. The bounce from the bottom shows marked improvement 57% to 71% from the bottom yet when taken with the above numbers merely means we know the patience is not dead but in serious condition. When new conduction gets to with 5% of the fifty year average then recovery has been accomplished, taking in consideration the new financing rules, the peak we achieved going into this down turn will be sometime far off in the future. 

As we progress in 2013 and look at the increase in sales and the decrease in inventory, the above question comes to mind.   Looking at the increase in pending sales right now, 2/18/2013, there are 54 more pending sales now, as compared to last year at this time or 25% higher than a year ago. At the same time the inventory had decreased 91 units or 15%, so that would indicate that the demand is not home sellers putting their properties on the market and trying to buy, and at the same time trying to sell their home. So the question remains where are the buyers coming from? First we need to look at the rental market; in that vein we need to ask which segment would most likely supply purchaser of houses. In Yellowstone County a three bedroom home with a garage, the average asking rent is $1,284 per month, which translates, with today’s interest rate of 3.41% and taxes and insurance,   into a home purchase price $229,000. A four bedroom home the average asking rent is $1,431 per month, which translates with today interest rate of 3.41% and taxes and insurance, into a home purchase price $256,000. So the second question becomes, what about availability, if purchasers are coming from renting there should be an increase in  the number of units available and there is, the 3 bedroom home with a garage and four bedroom homes, there has been an increase of 55 units available, closely correlating to the 54 unit increase in pending sales.  In the entire rental market we have seen a weekly increase of 49 rental units available this year when compared to last year. So now the critical question going forward, with the increase population and job base, in Yellowstone County, where is the equilibrium point of supply, demand and pricing in both home purchases and rentals?  As always it will be interesting to watch and I will keep you posted as the market develops the answers to the questions. If I may be of any assistance in the our purchasing, selling or investing in real estate do not hesitate to call or email

Thank you for the opportunity to serve your real estate needs

$184,000

Well maintained and super clean home.  4 bedrooms, 2 1/2 baths, light & bright living areas, oak kitchen with appliances staying, 2 car attached garage, fenced yard too!

January 2013

As I sit and review the performance of the market for January and all of 2012, the increase in in unit sales is outstanding, the decrease in market time is phenomenal, the increase in pending sales is a positive trend, yet then I get to price movement and scratch my head. The normal expectation would be with the type of increase in demand indicated by unit sales, the market should experience pretty dynamitic pricing pressure, yet when you look at the pricing data, that does come through the market. So the question becomes, will the market experience a marked pricing movement as we get further into the year and both sellers and buyers gain confidence in the economy of Yellowstone County?  In December of 2012 there were 2060 more people working in Yellowstone County than in December of 2011 and  2423 more working than in 2009.The pricing  trend will be interesting watch develop and I will keep you posted each month. With interest rates  12.8% lower than last January and with the minor price movement, it is actually was cheaper to buy a home this January as compared to last January by $37 a month and $85 cheaper than in 2009. I would have to believe we are very close to the end of that continue declining interest rate cycle, at some point in the near term the Federal Reserve will stop buying 85% of the mortgages originated in the United States. Then housing market will have to survive with money raised in the private market instead of the Federal Reserve printing the money. I hope you find the information both useful and enlightening, if you have any questions about either buying, selling or the market in general do not hesitate to call or email

$184,900

Delightful 4 bedroom, 3 bath home, fenced yard, 2 car garage, deck, RV parking, storage and more!

When looking at today’s market concerning interest rates the best perspective is look at the economy in the recent past. Since the economic events of 2008 the Federal Reserve has committed to driving interest rates down to spur sales in the housing sector and the economy in general.

In 2007 the interest rate average for the year was 6.34% for a thirty year mortgage, fast forward to 2012 the average for the year was 3.66% or a drop of 42.27%. comparing the median sales over that same period of time the median sales price in Yellowstone county in 2007 was $180,00 fast forward to 2012 and it rose to $197,950 or a 9.97% increase. When you look at the monthly payment including 25% for taxes and insurance, the payment went from $1,397 in 2007 to $1,132 in 2012 meaning it cost 18.96% less to own that median sales price home in 2012 as compared to 2007. The other aspect affected by the interest rates is ownership as compared to renting in 2008, renting the median price for a home was $1000 per month, the median ownership payment was $1,393. Fast forward to today renting will cost $1,095 versus median ownership payment $1,132 per month or only $37 more to own the median sales price in 2012, so far in 2012 that difference  has dropped to mere $7 more to own as compared to renting.    

As we progress through the next period I do not belie that interest rates will stay this low and the more normal difference between ownership and renting will occur.