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Market Update at a Glance July 2014

By
Industry Observer with Howard Sumner Consulting

JULY 31ST 2014

“SECOND HALF IS WHERE THE GAME IS WON?”

Two Months of summer gone, second half of the year beginning, so which way will be the direction of the market. First let’s look at closed transactions, July 2014 essentially matched last year in homes closed, 188 closed in 2013, 187 reported so far in July 2014. Number of closed sales in Yellowstone County are 1194 through July  as compared to 1268 in 2013, a 6% decline, so the market is creeping on matching 2013, one factor that stumped us all, is interest rate, the 10 year treasury, is actually lower than last year. I would have bet that we would be in the 5% range not the 4.125%, that why when trying to peer into the future it can be interesting to look back and see what you thought.  Based on the interest rates, staying at this level, the market might have chance to catch 2013 in level of sales.

Single family permits: we see total single family permits for the first seven months have a decrease 26% for year over year (2014 208 permits, 2013 281 permits), then from August 2013 to June 2014 we had ten months of continuing decrease year over year monthly decreases in permits issued, in July we broke that chain with an increase in monthly permits July 2014 of 42 permits, 39 were issued in July 2013. The single family new construction is continuing to show a slow/moderate of velocity in the market place.  So the question to ask is “in an increasing job market, increasing income and population environment with interest rate in slight decline, what would be the cause?”

Residential pending unit sales are flat year over year, to compare; 2013 July pending unit sales were up 9% over 2012 May.

The residential active properties for sale inventory in July is up 5% year over year, as a comparison, in July 2013 unit inventory was up 3% over 2012.   Market time in July shows an increase of 4% year over year, as a comparison in 2013 market time was -22% lower than 2012.  The absorption rate shows an increase of 1% in time year over year, as a comparison May 2013 absorption time was up 4% year over year bench marketing against 2012.

 Now for residential rentals, Through July of 2014 the market place averaged 427 units advertised for rent each Sunday, a year over year in increase of 32% (or 104 more units  each advertised Sunday), as a comparison in 2013 inventory for rent was up 16% vs. July  2012. An argument could have been made for both weather and an increased supply of new rental available in the market place, now progressing through July and into August, availability of rentals has substantially increased inventory must be the solo suspect for an explanation.

A factor affecting the market place other than weather is interest rates, According to Freddie Mac, July 2013 had an average interest rate of 4.37% and July 2014 the rate is 4.13% for a 30 year fixed rate. To show the impact, the payment on the average sales priced house in July of 2013 was $1,473 PITI, July 2014 it is now $1,493 PITI. A barely noticeable $20 increase in payment with almost a $10,000 increase in price might think that would move the market.

 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. I saw one report that estimated the buyer pool drop of 33% nationwide, in Yellowstone County I would estimate it about 15% to 20% decrease in buyers from stricter guide lines. Of course with that happening it increases the renter pool, thus the increase in building of apartments the last few years, and heading for saturation/over supply from the high demand of the past. Typical cycle in the supply/demand world.

Credit scores play a major role in obtaining a loan and there has been a slight “loosening” of credit score required to obtain a loan: FHA loan, 2014 average FICO for a closed loan is 688, 2013 it was 695 and in 2012 700.  Conventional loans, 2014 average FICO for a closed loan is 727, 2013 it was 747 and in 2012 763.

Employment and incomes can drive sales all other things being equal.  The latest figures available as of July 2014, there are 3184 more people working in Yellowstone County than in July of 2012 and 4521 more working than in April of 2011 and we have 1965 more employed than 2013. The number of persons employed is close to historical highs. Yellowstone County number of unemployed July 2014 is 3070, compared April 2012 there were 3848, unemployed and 4000 in 2011, we have 620 fewer unemployed than July 2013.   

 

All the trends require 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

Market update at glance   Year  Percentage Increase 
Yellowstone County   07/31/2014   2013 2014 or -Decrease
all information comparing year to date      
Residential  Closed Sales Units   1268 1194 -6%
             
Residential  Pending Sales Units   372 371 0%
             
Residential  Active Property For Sale 649 683 5%
             
Average sales price Single family Home $234,327 $244,300 4%
             
Average Square feet Single family Home 2448 2437 0%
             
Median sales price Single family Home  $214,900 $220,000 2%
             
Median Square feet Single family Home  2288 2255 -1%
             
Average Days on Market Till Offer Received      
Single Family Home      49 51 4%
             
Absorption rate -  TIME IN DAYS      
Time it would take for all existing   138 140 1%
properties to sell with no new inventory       
coming into the market place - residential       
SINGLE FAMILY PERMITS MONTH  39 42 8%
             
SINGLE FAMILY PERMITS YEAR  281 208 -26%
             
Average # Rentals Advertised Sundays 323 427 32%
             
Average Asking Price  Rental Home $1,098 $1,164 6%
             
Average Asking Price Rental Apartment $692 $717 4%
             
Number of Person Employed Yellowstone County    80,454    82,419 2.4%
             
Freddie Mac 30 year fixed rate commitment 4.37% 4.13% -5%

 

 

 

 

 

Comments (1)

Kevin Mackessy
Blue Olive Properties, LLC - Highlands Ranch, CO
Dedicated. Qualified. Local.

Looks like the second half of the year is the time to really get busy and sell some properties. 

Aug 20, 2014 04:09 AM