Market Update at Glance december 2013 End of the Year

December 31st 2013

“End of the Year, Dichotomies”

Wow another year and it went by at light speed. 2013 was a two part year, the first half a rocket ship headed for the best year Yellowstone County has ever seen, the second half, while good, had changed dynamics and we ended still 10.62% fewer homes sold than 2006 the peak year for number of sales in Yellowstone County. First I will look at the changes from year end 2012 to year end 2013, and second, I will and look at second half of 2013.  In single family permits we see total single family permits have a gain of 15% for the year, and then from August to December we had five months year over year monthly decrease (permits down 16% from December 2012. The increase in residential unit sales are up 8% year over year, as a comparison, in 2012 unit sales were up 18% over 2011. Both the single family new construction and single family resale are showing a decrease of velocity in the market place. Market time has a decrease of 14% year over year, as a comparison in 2012 market time was 18% lower than 2011.  The absorption rate shows an increase of 3% in time year over year, as a comparison in end of the year 2012 absorption time was down 23% year over year.  Pending sales are negative  -14% year over year in December, as a comparison in end of year  2012 pending sales were up 24% vs. December 2011. All This showing the market velocity is decreasing. Which is most probably caused by two factors an increasing interest rate, and increasing prices. The positive from an ownership position, the movement of prices up becomes a larger equity base, becoming a solid base to build appreciation on. The market has experienced a 7.72% approximate pricing movement since the end of 2012 mostly occurring by the end of July, this shows the dichotomy in 2013, along with the increase monthly inventory year over year and the decrease in monthly pending sales year over year. Confidence in the economy of Yellowstone County means the price gains are solid. The major factors affecting the market place are interest rates, employment and pricing. According to Freddie Mac, December 2012 had an average interest rate of 3.35% and December 2013 the rate is 4.46% for a 30 year fixed rate. To show the impact of that increase, the payment on the average sales priced house in December of 2012 was $1,230 PITI at the end of December 2013 it is now $1,501 PITI. This change in price and interest rate translates in an additional $11,614 dollars needed to qualify for the average sales priced home, that is an increase of 22% in payment compared to 2012.  When talking about interest rates, loan qualifications are also a player in the market, the additional scrutiny caused by the problems of liar/no doc loans has most probably reduced the buyer pool by about 15% to 20%. How else do you explain lower unit sales than 2006 with higher employment, higher wages and lower costs to own in Yellowstone County.  As interest rates move upward and prices move upward these twin trends will moderate sales and pricing trends. The caveat would be employment and incomes, strong employment and income can drive sales.  The latest figures available as of November 2013, there are 1598 more people working in Yellowstone County than in November of 2012 and 3854 more working than in November of 2011. The number of persons employed is at historical highs. Yellowstone County unemployment is now 3.6% compared to 5.0% State Wide.   Pricing trends continue a positive trend, albeit at a much slower pace than the first half of 2013, 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 the monthly payment has only $99 to go to match 2007, with the average sales price home monthly PITI was $1,602 in 2007, compared to today’s average sales price home PITI of $1,501. Another fact of the market place, to purchase the Average priced home in December 2012 your payment was $148 a month more than renting the Average home for rent, in December 2013 it now costs $374 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 long as population/jobs growth continues match the number of rental units being built. Typically as the cost of ownership goes up rents will follow the upward trend by a few months.  Which brings me to the last dichotomy of 2013 available advertised rental we began the year running 14.3% less than 2012 and we end 2013  matching the number of units available and the first week of 2014 shows us with 37.53% increase in availability over 2013. A trend that requires watching when thinking about the health of the market overall. 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

Number of homes sold trends

Number of single family permits issued trends

Number of single family plus duplex living units permits issued trends

Home sales pricing trends

Rental pricing and availability trends

Population trends

Employment trends

Wages Trends

Interest rates trends

monthly payment trends