Housing market holding strong
By CHARLES S. JOHNSON - IR State Bureau - 07/11/08
Helena Ir.com
Montana's housing market is much stronger than it is nationally because of the state's strong economy and the refusal of most lenders here to issue subprime mortgages, state Revenue Director Dan Bucks said Thursday.
Speaking to a legislative interim subcommittee, Bucks cited federal statistics showing that Montana housing prices were up by an average of 4.7 percent for the year ending March 31, while national housing prices dropped by an average of 3.1 percent. Montana's housing price increase ranked third highest behind Wyoming and Utah, he said.
He attributed this trend to the fact that Montana's economy is stronger than the national economy and the state's unemployment rate is below the national average.
Bucks also heaped praise on Montana's mortgage finance industry officials for their actions that have mostly shielded this state from the subprime mortgage crisis that's led to mortgage defaults and home foreclosures in some parts of the country.
"We all owe a debt of gratitude to the Montana-based mortgage finance industry," Bucks said.
People in this industry here "said no to the junk money" when Wall Street called, he said, and mortgage originators here said no when some prospective homebuyers wanted subprime mortgages.
"Because they said no to this funny money, we have been spared from what's going on nationally," Bucks said.
The price of homes in Montana is critical at this time because the Revenue Department is completing its latest cyclical reappraisal of residential property. Bucks said the agency will deliver the completed reappraisal to a legislative committee in November.
The reappraisal establishes the market value for homes for tax purposes. That value - multiplied times the local and state mill levies and tax rate - ultimately determines how much in property taxes a homeowner owes.
Although Gov. Brian Schweitzer said there will be, on average, no statewide property tax increase resulting from reappraisal, results will vary widely by county and by area, if the past is any indication. There usually are wide variations in the percentages of increases and decreases in new home values across the state and by county.
It will be up to the 2009 Legislature to decide on how to modify the reappraisal results to reduce the impact on taxpayers. After recent past reappraisals, lawmakers have lowered the tax rate used to calculate property taxes and exempted a portion of the new property value from taxes.
Another option would be to simply postpone the reappraisal for several years, said Sen. Jim Elliott, D-Trout Creek, who is chairman of the Senate Taxation Committee.
Bucks told the subcommittee that the benchmark date for setting the property values for home reappraisals was supposed to be Jan. 1, 2008, but he extended it by six months to examine home sale information through June 30.
That will enable the department to examine late-breaking trends - upward and downward - in Montana housing sales, he said. Residential appraisals are determined largely based on the sales of comparable homes in an area.
To help learn about local housing trends across the state, Bucks said top Revenue Department officials held meetings in 18 cities with real estate agents, appraisers, mortgage finance officials, contractors and local planning officials.
Beki Glyde Brandborg, who facilitated the meetings, summed them up for legislators. She said that while housing prices vary by the area, residential property values generally had "appreciated considerably but leveled off in 2007 to more realistic numbers."
"Prices are stabilizing, not shooting up or down significantly," Brandborg said, calling it "a return to consistency."
Brandborg said other trends that emerged from the meeting included:
- The sales volume for Montana homes has slowed down.
- Fewer out-of-state residents are buying homes in Montana, particularly the "higher-end homes." One reason is they are having trouble selling their homes in other states, and some are choosing to buy new homes in other states.
- A "very low inventory" of lower-priced homes exists, but demand remains high. She said the need for affordable housing is universal across the state, with available homes in this category selling quickly. Yet very little new affordable housing is being built in Montana.
- Values of medium-priced homes are holding well, while there is a holding pattern for high-end homes. Significantly fewer speculative homes are being built.
- Home builders remain busy in Montana's largest cities.
- As gasoline prices escalate, home buyers have less desire to commute from outlying areas. That is leading to more "in-fill" homes in urban areas and a revitalization of city centers.
Click here to visit the Revenue and Transportation Subcommittee on HB 488 - Study of Property Taxes and Periodic Reappraisal Web site.
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