market update at a glance april 2015

http://www.realestatemontana.com/blog/Market-update-at-glance-april-2015

April 30^th 2015

 “Spring has sprung and the sprung has the market Jumping”

April’s market update starts with a saying I believe most would be familiar, about flowers coming to bloom as sign of renewal and growth.  Actually though April is a continuation of “March Madness”  activity since weather warmed and interest rates dropped in 2015 Market.  At the end of April 2015, closed sales up +12%, pending sales up +10 %, inventory down    -10%, and interest rates down-15% from the year earlier.

As of the end of the week of May 1st the rig count in North Dakota is down -97 rigs since last year,     79 working in 2015 and 176 working in 2014. So the Million dollar question for 2015 remains the same “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?” So far, with the rapidity of the decline in the rigs working in North Dakota ,no major discernable effects to the Yellowstone county economy.

First let’s look at closed transactions, Number of closed sales in Yellowstone County,  604  through April 2015 as compared to 537 in April 2014 showing an increase in closed transactions of +67, which translates into a +12% increase year over year.

Residential pending unit sales in 2015 are up +10% years over year(414 units pending).  To compare; 2014  April pending unit sales were up +7% (377 units pending) over April 2013 (351 units pending), interest rates increased year over year  comparing April of 2014 (4.34%) to 2013 (3.45%)  interest rates  were .79%  higher, a +26% increase from April  2013, April 2015 (3.67%) to April 2014 (4.34%)interest rates declined -15%.

The residential active properties  for sale inventory in April 2015 (514 units active) is down -10% year over year, as a comparison, in April 2014 (571 units active) unit inventory was up +4%  comparing 2013 (550 units active)  (comparing 2013 to 2015 inventory is down  -6.54%).   Market time in April shows an decrease of +7% year over year(54 days 2015 vs 58 days in2014 and 60 days in 2013) , as a comparison in 2014 market time was -2% lower than 2013(so a stable trend).  The absorption rate shows an decrease of    -19% in time year over year, as a comparison April 2014 absorption time was up 43% year over year(probably weather and interest rate related) bench marketing against 2013.

Single family permits: we see total single family permits for 2015 have an increased +8% for year over year (2015 113 permits, 2014  108 permits). For April 2013, 45 single family permits were issued, in April 2015 40 single family permits were issued a decrease of -11.11% over 2013. A huge increase in single family permits happened in February 2015 due to code changes that became effective April 1^st that add $2 to $3 dollars per square foot cost to a new home) March saw a slight decline in permits issued then an increase in in april so a positive for the market place. Again  single family new construction has been gaining velocity in the market place held back only in people’s ability to finance without their present home sold.  

 Now for residential rentals, Through April of 2015, the market place had an average of 385 units advertised for rent each Sunday, a year over year in decrease of -14% (or 61 less units advertised each Sunday), as a comparison in 2014 inventory for rent was 446 units advertised in Sundays, up 39% vs. April 2013, only 320 units were advertised each Sunday. Rent average asking price for an apartment have moved up $750 for April 2105 as compared to $719 for April 2014 an increase of +4%, as a comparison April 2014 was  +3% higher than  April 2013 ($697 asking price). So rents are increasing slightly faster or at the national consumer price index. Homes for rent, through April 2015 average asking rent is $1,174 for 2014 asking rent for a home was$1,151 an increase of  2% year over year  on top of a 5% rise 2014 over 2013. (2013 average asking was $1,099.)

 A factor affecting the market place  is interest rates, According to Freddie Mac, April 2015 had an average interest rate of 3.67% (down -15% from 4.34% April 2014) and April 2013 the rate was 3.45% for a 30 year fixed rate an increase of  +5.9%  for 2015 from 2013. To show the impact, the payment on the average sales priced house in April of 2015 was $1,391 PITI (average sales price $240,710), April 2014 it was $1,498 PITI (average sales price $239,118), April 2013 it was $1,258 PITI (average sales price $223,687). This change in price (up+ $1592) and interest rate decline translates in a decrease $4,938 yearly income needed to qualify for the average sales priced home in April 2015 as compared to April 2014. Which explains a lot of the activity.

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 -43.12% (2006 interest rate was 6.45%) with all those positives the yearend sales for 201 were -8.5% lower than 2006. Based on the velocity of the market so far in 2015 we have chance of beating total sales of 2006 this year.

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

This graph below is my bench mark for the activity in the market place. It compares pending sales to active listings so it compares different yearly markets in a relative way. The year 2006 was the peak year in number of sales and 2003 was the highest this measure has archived. In 2015 you can see the markets relative strength to 2006, and this year we have archived a 84% ratio the highest it has ever been is 88% in 2003. If the market continues along the path it is on now we will finally archive total higher unit sales than 2006. Nine years later with a drop interest rates of 43% (6.45% vs 3.67%) and increase in Jobs of about 7,000, a population increase of about 15,000. my belief is these numbers and facts show how the change in mortgage lending requirements ha affected home buying.