Market update at glance thru july 31st 2013

Cycle, cycle, cycle

The Second half of the year has begun and the residential market in Billings enters its normal second half of the year behaviour. While we see year over year increases we see month to month decreases. The increase in in unit sales is up 10% year over year while the month over month saw a 6.5% decline, the decrease in market time is 22% year over year, the absorption rate shows an increase of 4% y o y  and an increase of 4% month over month, the increase in pending sales is a positive  9% y o y and a decrease of 15.45% month over month, showing the market velocity is a decreasing increase year over year in closed sales, this is a positive  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 7.08% approximate pricing movement since the end of 2012 and about 8% year over year (one caution 2012 just started to move about this time of year in pricing, so that number should moderate back to the year over year figure as we go through the final 6 months of the year), both sellers and buyers are gaining confidence in the economy of Yellowstone County the price gains become solid. The one major moderating factor in the market place is interest rates and they have started to move upward. According to Freddie mac 2012 ended with an average rate of 3.66% and through July the rate is 4.37% for a 30 year fixed rate, to show the impact of that increase, the payment on the average priced house at the end of 2012 was $1,276 PITI at the end of July is now $1,469 PITI. As interest rates move upward and prices move upward they will moderate sales and pricing trends. The caveat would be employment  The latest available figures  of June  2013 there 1234 more people working in Yellowstone County than in May of 2012 and 3664 more working than in May of 2011 ,unemployment in Yellowstone county is now 4.4% compared to 5.5% State Wide, 5.2% in Missoula, and 7.0% in the Flathead. Pricing trends continue along a positive trend and even with interest rates higher than last year, total monthly payment has risen above the year before, for the Second time in five years, yet still has a long way to go to match the pitit in 2007 of the average sales price home of $1,602 compared to today’s average sales price home PITI of $1,469. The other amazing factor is, to purchase the Average price home your payment at the end 2012 was $194 a month more than renting the Average priced home for rent, in July it is now $372 more renting the Average priced rental in Yellowstone County. This bodes well for the cash flows from rental properties as the cost of ownership goes up rents will follow the upward trend by a few months. Of course with the positives in the resale market new construction is experiencing a another stellar year and has seen a 43% year over year increase in single family permits which puts new construction just 17 permits shy of the record year of 2007. As a side note the single family new construction is also showing the decrease of the increase velocity in the market place showing at 66% increase y o y in March and now “just” a 43% Y o Y increase.  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