Median housing prices in Billings slipped a bit in February over January, according to a report from CoreLogic, a global property information and analytics provider.
That’s true, according to veteran Billings Realtor Dean Luptak of Coldwell Banker The Brokers. Comparing January to February, the median price slipped 8.5 percent, from $235,000 in January to $215,000 in February 2017. Additionally, the February median home price was a decrease from the median price of $220,000 in February 2016, said Luptak.
Luptak suspects the decline is something of an anomaly, brought about by the bad weather of January and February. Look, he said, at the number of closings and the inventory list – both were down in January and February, but bounced back by five percent in March. Closings YTD are down 8.6 percent and inventory is down 8.8 percent.
The uptick in market activity seems to have resulted in an increase in the median home price on Multiple List Service Areas 1-8, in March — $232,000 in 2017 compared to $221,000 for March of 2016.
The good news is that most of the year remains, during which the market can regain its equilibrium. Although, notes Luptak, while rising prices are good for sellers, they could price many buyers out of the market, which is bad for sellers.
The likelihood that the market will continue its upward trend is supported by the fact that while the Billings area may be generating jobs, “it’s not building enough new housing to bring inventory levels up to a balanced market,” writes Luptak in his monthly newsletter. The inventory level is only 3.3 months supply compared to last year YTD, which means there are fewer homes on the market for sale. Six months supply of inventory is considered a balanced market. If the inventory falls below the six month supply, it becomes a seller’s market.
But new construction, too, is lagging, in Billings, through the first quarter. Construction of single family dwelling units as determined by the value of permits issued is down by almost one-third over last year’s first quarter. Brian Anderson of the Billings City Building Department said that he suspects the weather has had a lot to do with the slip in numbers, a theory supported by the fact that since the weather has improved they have had “a flurry” of applications.
Last year by the end of March there were single family permits issued totaling $18,439,036, this year that number stands at $12,439,37. March alone this year was only $6,545,802, compared to $8,546,479 last March.
Commercial construction, too, is down according to the numbers, but said Anderson, some commercial permits, such as the addition to the jail, a major project, were issued last fall. Year-to-date commercial construction permits totaled $21,485,039 compared to $14,774,612 this year. The month of March is down dramatically this year at $5,170,437 compared to March 2016, $20,314,677.
Total of all construction permits YTD in Billings, including remodeling, is dramatically down from last year, by almost half — $78,380,505 compared to $44,268,100 for the first three months this year.
Whereas, over the past few years multi-family construction has been strong, so far this year there have been no permits for duplex or apartment projects. Nor have there been any, so far, for hotels/motels.
The market is “perfect for landlords to sell rentals,” commented Luptak, “a lot are being sold without a great deal of fixup.
“Between the lack of inventory and the advent of HDTV, buyers seem to be willing to buy homes in less than perfect condition,” said Luptak, adding that the greatest thing since the internet to happen for real estate, are house renovation reality shows.
While home prices in the Billings area are just getting back to their 2006-07 levels, they tend to be higher than a lot of places elsewhere in the country. People coming here from Texas, the Midwest or the Southeast have “a little bit of sticker shock,” said Luptak. Prices here are lower, however, than they are on the coast.
For some time, the market was being impacted by the reluctance of young people to become homeowners, but that is changing, according to Luptak. College debt is still an issue, but as their wages increase, younger people are better able to afford a home. “A lot of companies nationally as well as locally are paying some good wages…because of a competition for workers,” said Luptak.
But the cost of housing will still have an impact, keeping many out of the market who in eras past were able to own their own homes.
Billings is somewhat fortunate in addressing the housing shortage because its regulatory environment is not quite as onerous as it is in other parts of the country, said Luptak “however, it is expensive.. so, we are still seeing a lot of apartments in the works that will soon be coming on line. There is a lot of optimism among apartment developers, knowing that a lot of people are going to be renting.”
Economic analysts, nationally, are saying its good news that a plunging homeownership rate in the US has finally stabilized. At about 63 percent, however, it is at its lowest level in almost 50 years.
Luptak said that the consumer confidence level plus the threat of rising interest rates spurred some higher end buyers to get into the market recently, “but the miniscule interest rate increase last month by the Fed probably dampened that rationale somewhat as buyers realized that interest rates are likely to increase but in a slow and methodical fashion.”
According to CoreLogic, home prices nationwide increased year over year by 7 percent in February 2017 compared with February 2016 and increased month over month by 1 percent from January to February.
Luptak said he does not think Billings has a serious delinquency problem.
According to CoreLogic, nationwide mortgage 5.3 percent of mortgage payments were delinquent 30 days or more, reflecting a 1.1 percent decline over last year. That compares to Billings with 3.0 percent of mortgages delinquent by at least 30 days (including those in foreclosure) in January 2017 compared with 3.3 percent in January 2016.
Billings mortgages in serious delinquency (90+ days past due) totaled 1.3 percent in January 2017 compared with 1.3 percent in January 2016. The foreclosure inventory rate for this January was 0.5 percent compared with 0.5 percent a year earlier.
Measuring early-stage delinquency rates is important for analyzing the health of the mortgage market, according to CoreLogic.