Market update at glance august 2013

Market update at glance

August 31st 2013

Trends are they my friend?

Two thirds of the year over, the residential market in Billings entering the last third of the year, what behavior might we expect from the market place. In single family permits we see the first year over year monthly decrease (permits down 21% from august 2012, yet total single family permits still up 33% for the year. The increase in residential unit sales is up 10% year over year, the decrease in market time is 21% year over year, the absorption rate shows an decrease of 2% year over year, the increase in pending sales is a positive 6% year over year, showing a more moderate increase. This showing the market velocity is a decreasing increase year over year; 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 7.61% approximate pricing movement since the end of 2012 and about 8% year over year, both sellers and buyers are gaining confidence in the economy of Yellowstone County and the price gains are becoming solid. The two major moderating factors in the market place are interest rates and employment; interest rates have started to move upward. According to Freddie Mac, august 2012 average interest rate of 3.60% and through August  2013 the rate is 4.46% for a 30 year fixed rate, to show the impact of that increase, the payment on the average priced house in august of 2012 was $1,243 PITI at the end of august 2013 is now $1,500 PITI. As interest rates move upward and prices move upward they will moderate sales and pricing trends. The caveat would be employment, strong employment can drive sales. The latest available figures of July 2013 there 1412 more people working in Yellowstone County than in July of 2012 and 3543 more working than in July of 2011. The number of persons employed is at historical highs. Yellowstone County unemployment is now 3.9% compared to 4.8% State Wide, 4.6% in Missoula, and 6.1% in the Flathead.                         Pricing trends continue along a positive trend, even with interest rates higher than last year, total monthly payment has risen above the previous year, ending the trend of rising prices with lower monthly payments. Yet still the monthly payment has a way to go to match 2007 of the average sales price home monthly PITI was $1,602 compared to today’s average sales price home PITI of $1,500. Another fact of the market place, to purchase the Average price home in August 2012 your payment was $200 a month more than renting the Average home for rent, in August 2013 it now costs $406 more in monthly payment to own, as compared to renting the Average  rental home  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 another positive year and has seen a 33% year over year increase in single family permits. 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 year over year in March and now “just” a 33% Year over Year 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