Market update at glance January 2015

http://www.realestatemontana.com/Blog/Market-Update-at-glance-January-2015

above a link to the complete article

January 31st 2015

 “Anomalies, within the market place”

I think I will start Januarys market update with the same quote as Decembers, In the immortal words attributed to Yogi Berra "It's Hard to Make Predictions, Especially about the Future". I think that best describes 2015 Market.  At the end of January 2015, closed sales down -9%, pending sales down -1%, inventory down    -3%, and interest rates down-17% from the year earlier. As of the end of the week of February 3rd the rig count in North Dakota is down 36 rigs since last year 132 in 2015 and 168 working in 2014. So the Million dollar question for 2015 “Will the decline in energy costs and interest rates offset any possible decline in business and jobs dues to the decrease in energy/oil costs?”

First let’s look at closed transactions, Number of closed sales in Yellowstone County,  105  in January 2015 as compared to 117 in January 2014 showing a decrease in closed transactions of 12 which translates into a -9% decline year over year.

Residential pending unit sales are Down -1% years over year.  To compare; 2014  January pending unit sales were up 1% over January 2013, interest rates increased in august of 2013 and were a full percentage point higher, a 33% increase from January  2013 . (2013 there were 239 pending sales; 2014 there were 242 pending sales, 2015 there are 240 pending sales). With the pending sales in all three years similar the pipe line it 2015 starts with the look of matching the past couple of years.

The residential active properties  for sale inventory in January 2015 is down -3% year over year, as a comparison, in January 2014 unit inventory was up 10%  comparing 2013 (comparing 2013 to 2015 inventory is up 7.6%, 2013 there were  486 units for sale ; 2014 there were  546 units for sale ,2015 there are 528 units for sale ).   Market time in January shows an decrease of -10% year over year, as a comparison in 2014 market time was -5% lower than 2013(so a positive trend).  The absorption rate shows an decrease of     -8% in time year over year, as a comparison January 2014 absorption time was up 2% year over year bench marketing against 2013.

Single family permits: we see total single family permits for 2015 have a decreased -30% for year over year (2015 14 permits, 2014   20 permits). For January 2013 27 single family were issued, in January 2015 14 single family permits were issued a decrease of 48% over 2013. Yet I would caution one month a trend it does not make,  single family new construction ha been gaining velocity in the market place held back only in peoples ability to finance without their present home sold.  

 Now for residential rentals, Through January of 2015 the market place  an average of 429 units advertised for rent each Sunday, a year over year in decrease of -10% (or 50 less units  each advertised Sunday), as a comparison in 2014 inventory for rent was up 37% vs. January 2013. Rent average asking price have moved up $738 for January 2105 as compared to $727 for January 2014 an increase of 2%, as a comparison January 2014 was 5% higher than  January 2013. So rents are increasing slightly faster or at the national consumer price index. Homes for rent, through January 2015 average asking rent is $1,173 for 2014 asking rent for a home was$1,129 an increase of  4% year over year  on top of a 2% rise 2014 over 2013. (2013 average asking was $1,108.)

 A factor affecting the market place  is interest rates, According to Freddie Mac, January 2015 had an average interest rate of 3.67% (down -17% from 4.43% January 2014) and January 2013 the rate was 3.41% for a 30 year fixed rate an increase of  7.6% from 2013. To show the impact, the payment on the average sales priced house in January of 2015 was $1,305 PITI (average sales price $225,917), January 2014 it was $1,607 PITI (average sales price $253,834). This change in price (down $27,917) and interest rate decline translates in a decrease $12,942 yearly income needed to qualify for the average sales priced home in January 2015. These numbers are skewed by the drop in average sales price which is reflective of lower priced homes selling most probably influenced by the increasing rents and renters moving to ownership which had been delayed. When talking about interest rates, loan qualifications are still a player in the market; the additional scrutiny caused by the problems of the housing collapse has most probably reduced the buyer pool. To give this some perspective in Yellowstone county since the peak year of 2006 when 2040 residential sales took place we have approximately 7,000 more people employed, about 19,000 more residents in Yellowstone county, average income is up about $10,000 a year and interest rates are down about 40% with all those positives the yearend sales for 2014 were 8.5% lower than 2006.

So even with the demographic shifts in renting versus buying I would venture that Yellowstone County has a very stable base in home sales as compared to economic activity.

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