Community News

Homeownership has come under an enormous amount of scrutiny in the last several years, with some people feeling huge relief to be able to sell their homes before becoming a short sale or foreclosure statistic and returning to the “safety of renting”, while others cannot avoid losing their home. The media tends to focus on the extreme seller’s consequences, yet fails to perceive the immense opportunity for a buyer to acquire a “once-in-a-lifetime opportunity”. 

A recent article published by The Wall Street Journal gives us a timely reminder that there’s truly no place like home. At the peak of the housing bubble just a few short years ago, the media was full of cheerleader stories and pointers on how to get rich from your home. Though we are certainly not under the same market conditions, here are WSJ’s ten top reasons why it’s still a good time to buy a home in any market, along with our commentary, perspective, and local statistics. 

1. There are good deals available. It is a buyer’s market and across the nation standing inventories are still outpacing buyer demand.   Standard & Poor’s Case-Shiller Index tracks home prices in 20 major cities and reported prices down 30% on average from their peak five years ago.  Those who are not attempting to time the bottoming out of the market will certainly feel confident that they purchased at a good price.  For instance, within the Bozeman city limits, the average sales price for the period ending August 31, 2010, was $275,009. Compared to the same period in 2006 with an average sales price of $345,904, this exhibits a 20% reduction. The median sales price for this same year-to-date period is $237,194 in 2010 versus $314,945 in 2006, representing a 25% decrease.

2. Mortgage rates are very favorable. The lowest rates in history are holding around 4.3% for a 30-year mortgage. Even from two years ago when rates were on average at 6.3%, this difference can mean a 20% smaller monthly mortgage payment.  And on the chance that rates fall even further, you can still refinance. Local rates are reflective of national rates.

3. Tax savings can make owning better than renting. According to the WSJ, “You’ll save on taxes. You can deduct the mortgage interest from your income taxes. You can deduct your real estate taxes. And you’ll get a tax break on capital gains when you sell… many people will find that these tax breaks mean owning costs them less, often a lot less, than renting.”

4. You will own your own home! Simply stated, you can remodel, paint, and improve the property without consulting a landlord and without feeling you are spending money on someone else’s investment. The satisfaction of ownership feels good, and it shows. We have the good fortune to live in communities where immense “pride of ownership” prevails; it is always driven by owner-occupants.

5. Homeownership provides better quality and variety. In many markets, it is really difficult to find diverse rental properties.  Generally speaking, most rental properties are in apartment-like or condo settings. Our marketplace has seen more single-family homes for rent in the past few years, but they are usually also for sale.

6. There is potential protection from inflation. While not a perfect system, many studies still support the fact that in the long haul, housing can withstand and even beat inflation by a couple of percentage points. This is especially significant to younger buyers who are looking forward to the next 30-40 years. Yields on government bonds have declined recently making owning a home even better.

7. It is a long-term “shelter” play. If the past few years have taught us anything, it is that real estate was never intended for a short-term yield or a “quick flip”. Though it is not recommended that homeownership be used as a “get rich quick” scheme, building equity in a home is a way to tie in long-term economic growth with an individual savings plan. Owning a home generally feels like a safer route to savings while also fulfilling the most basic role of providing shelter.

8. Ownership forces you to save for your future. Though many people rent because they can pay less than they would for a monthly mortgage payment, it’s necessary to keep in mind that the extra amount is essentially forced savings as you build equity in the home from the portion of the payment that goes towards the principal. 

9. Great choices are abundant. The National Association of Realtors® estimates inventory levels to be around 4 million homes. Some markets have stabilized because sellers who don’t absolutely need to sell have pulled their homes off the market.  But keep in mind, there are also homes becoming available as the banks reintroduce foreclosed properties into the inventory. A quick look at our Southwest Montana Multiple Listing Service on October 8, 2010, shows there are 235 single-family homes listed for sale in the Bozeman city limits and 336 in the surrounding area.  Belgrade has 138 active homes for sale with 95 available in Manhattan and Three Forks. Big Sky currently has 150 homes for sale, and Livingston and Park County have 268.

10. The market will stabilize. As always, supply and demand will eventually stabilize. The estimated population growth of 100 million people in the next 40 years will increase homeownership demands.  Many predict that excess inventory will again return to “normal” pre-2004 levels in the next few years in most markets.

And number 11… In the end, all real estate is “local”. Our current local economic conditions have received some positive signs. Our inventory levels seem to have stabilized and in some cases declined.  In fact, our residential inventory levels are at a four-year low in the city of Bozeman. Most other segments of our market are at or slightly below previous years. The unemployment rate in Gallatin County was reported at 6.3% at the end of August, which is down from 6.6% in July and 7.5% in June. Our unemployment rate is lower than the state average of 6.8% and a national average of 9.6%. The recent hail storm on June 30, 2010, has brought us our own “economic stimulus” package, putting many construction workers back on the job and also stimulating the building supply and auto repair industries.

Furthermore, we are still seeing a positive increase in population figures in Gallatin County. There was a reported population of 68,000 in 2000, which was a 33% increase over 1990.  And we are still growing, though at a slower rate. According to the Bureau of Business and Economic Development at the University of Montana, Gallatin County will end this year at 93,000 residents, which is a 37% increase from 2000.  So, with all that said, now may be the “right” time to consider purchasing your first or next home.