Market up date at glance august 2012

Market at a glance august 2012

We are now two thirds through the year and the good numbers continue to roll through the housing market here in Yellowstone Count, Inventory lower by 34%, pending sales up by 48%, closed sales up by 21%, new home permits up 77% 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 their “operation twist”, selling short term bonds and buying mortgages, has managed to drive interest rates to historical lows, 15.7% below 2011 and 44.5% below where they were in 2008. From to July 2011 to this July we added 500 private payroll jobs and population has increased approximately 1450 people. Lots of positives in the economy.

Yet with all these positives, pricing structure has only changed by 2% to 2.5% year over year when you take size and price into the actual formulation. Thus when all the positives are taken into consideration, on first blush, that would seem a more than modest price increase.  So the question becomes why, ahhh and that is the million dollar question. I would venture the opinion that the underlying reason is 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. As always it’s fascinating to me to watch the market and how it operates with all the different forces involved. This year has been a stunning example of how it responds

Below is a graph showing the Yellowstone county, City of Billings Home Sales and Single family and duplex permits since the peak year sales in 2006