I recently returned from the National Association of Realtors® (NAR) conference in Anaheim. One of my favorite sessions every year is the Economic Outlook report presented by Lawrence Yun, Chief Economist of NAR. I love his no-nonsense and refreshing look at the facts, which always gives me hope for the coming year.
Reading national statistics, watching trend lines, and listening to U.S. average and median sales prices, as well as sales and inventory levels, may be as helpful as saying, “the average annual daytime temperature in the United States is 76 degrees”, when what you really want to know is “how cold will it be at Bridger Bowl on New Year’s Day?”. I thought I would give you a bit of both views for the last article of 2011.
Trying to understand and forecast the real estate market, both locally and nationally, is always a bit of an enigma. Homes have the best affordability conditions in quite some time, yet national home sales are still sluggish. National home prices have stabilized for the last two years, yet the general perception is that home values are continuing to decline. The Federal Reserve Monetary Stimulus was established to encourage more lending, yet regulations are in place that discourage lending. Talk about mixed signals.
Housing affordability (the percentage of households who can afford to purchase a home) is at record highs for the last decade. In fact, it is the highest it has been in 40 years of tracking the index. Yet there are still many who are trying to time the bottom of the market, which is certainly a fruitless venture since interest rates will most likely be rising and overall costs of financing a home could increase over the term of the loan.
National demographics of recent buyers profiled for 2011 gives a median age of 43 with a gross household income of $80,900. The households are comprised of 64% married couples, 18% single females, 10% single males, and 7% unmarried couples. Nineteen percent of the buyers own a second home. The share of first time home buyers in 2011 has dropped to 37% of total buyers from a high of 50% in 2010.
An extremely interesting analysis is comparing cost indexes from 1981 to 2011. As a base, the Consumer Price Index increased from 87.2 to 226.3 (160%). Rent during that time has increased 200%, food 150%, gasoline 197%, college tuition 693%, medical care 410%, and the monthly mortgage payments on a median price home only rose a modest 17%.
Investors always have a role in the market, and they are currently looking at the deals that can be made. All cash sales are at a record high, making up 30% to 35% of all sales. Multiple bidding situations have become more and more common on properties that have been foreclosed. Rental properties have once again become a more attractive alternative than keeping money in the bank. However, the median rental prices that are supported in markets are now basically the same as the median monthly mortgage payments in the same markets due to the lower home prices and interest rates.
Information speaks volumes, yet local statistics generally invoke the most interest. Data pulled on November 10th from the Southwest Montana Multiple Listing Service (MLS) summarizes the market for the first ten months of this year compared to the market through October 2010. Additionally, I am including a few details from NAR which releases information each month on U.S. market conditions as a benchmark.
Local residential inventory numbers continue to decrease across all markets with the two largest changes coming within the Bozeman city limits with a 20% decrease and Belgrade and the surrounding area with a 30% reduction. Condo/ townhome inventory saw significant change with Bozeman city limits decreasing 23%, Belgrade/surrounding area 53%, Gallatin Canyon/ Big Sky 24% and Park County/ Livingston 31%. Nationally, inventory levels of existing homes dropped 13.8% comparing October 2011 to October 2010. This is a very healthy trend and essential for market stabilization.
Another strong trend is the number of sales from year to year with an increase of 11.3% in the Bozeman city limits for single family residential homes. The Bozeman area outside of the city limits demonstrated the largest jump with 20.9%. Existing home sales nationally increased by 13.5% to 4,970,000 units in October 2011. Sales of condos/ townhomes increased from 39.5% in Bozeman city limits to 100% in the Belgrade area. Big Sky’s condo market increased 50%, from 76 to 114 units.
We have seen signs of price stability, especially in Bozeman and Belgrade. Average sales prices for single family homes have decreased only 0.7% in the Bozeman city limits and 1.6% in Park County/ Livingston. These average sales prices have actually increased by 0.02% in Belgrade/ surrounding area, 4.7% in Manhattan/ Three Forks, and 23.94% in Gallatin Canyon/ Big Sky. Throughout the United States, the average sales price of existing homes decreased by 4.6%
A final note is a quote by financial planner John E. Girouard, which was referenced by Mr. Yun and can be found at Forbes.com (10/12/11), “My answer to those who ask whether now’s the time to buy a house is that the American Dream is and always was alive and well. It has nothing to do with the direction of housing prices but everything to do with your financial situation, income stability, ability to shoulder the costs, and if the home you have your eye on is your version of the American Dream – a home you love that you hope to live in for an extended period.” Not only is real estate local, it is personal and timely.
©ERA Landmark Real Estate 2013. All rights reserved. Robyn Erlenbush CRB, Broker/Owner. Each ERA Office is independently owned and operated.
All information contained herein is gathered from a variety of sources deemed reliable, however, it is not guaranteed or verified by the seller, ERA Landmark, or any of its associates. We urge independent verification of each and every item submitted to the satisfaction of a prospective purchaser.
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