When John Kunz, owner of The Falls Real Estate agency in Great Falls, attended a national Coldwell Bank convention not long ago, the atmosphere was a bit gloomy.
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According to the New West, Missoula, Mt., is part of the 31 percent of the country’s housing markets that is actually expanding.
That’s the good news. The bad news is that as Montana mortgage costs rise, it is becoming increasingly difficult to afford a home there.
The 2007 Missoula Housing Report, released by the Missoula Organization of Realtors Thursday, shows the median home price in Missoula continuing to soar — largely driven by the rising cost of land in the metro area.
The median home price within Missoula’s city limits jumped to $205,000 in 2006 compared to $185,000 in 2005. When you add Lolo into that mix, the median home price in 2006 jumps to $206,850 from 2005’s $192,000.
Looking at the records of bare land sales over the past three years, it’s not hard to see from where the majority of that growth stems.
In 2003, the median price for a lot in Missoula was $75,900. In 2006, the median price for a lot in Missoula was $95,000—a 25.2 percent increase.
Meanwhile, the median price in the this segment of the Montana housing market over the same time period was almost parallel—from $165,000 to $205,000 — a 24.2 percent increase.
Mary Marry, the president of the Missoula Organization of Realtors said those land prices are one of the biggest hurdles to housing affordability.
Once you pay up to $95,000 for a lot, when you start actually building a house, “it becomes a challenge,” Marry said.
The number of lots sold has stayed fairly steady over the past three years, hovering around 60 sold per year. In 2006, 63 lots were sold, according to the report.
The cost of land is tied to simple supply and demand: There are fewer and fewer open lots in Missoula — a city that is confined by adjacent public lands or steep slopes where building is near impossible —and so the prices continue to go up as demand for mortgage loans increases.
“Our challenge in Missoula is that there is steady demand for housing, but the supply is limited. There are only so many directions you can go,” Marry said.
The report echoes that sentiment in the summary. It reads:
“Providing new stock for continued strong housing demand is a growing challenge. Land availability and housing affordability contribute to that challenge.”
On the other hand, the lack of land availability is one things that has kept the Missoula market strong as other markets in the country begin to slump.
“Yes, land availability is the primary reason the prices have gone up as much as they have. The other part is that lack of land availablility is what kept us from building when a lot of places in the country did,” said Collin Bangs, a real estate agent and developer in Missoula.
“It artificially kept us from getting into the problems a lot of the rest of the country did. In one way it kind of saved our bacon in the short term but long term, it’s going to be a large problem.”
The report breaks down “affordability” under the terms described by the National Association of Realtors’ Housing Affordability Index, which takes into account local mortgage rates, median price, median family income and home loan terms.
With these calculations, a family would need to make $58,128 per year to afford the median priced home in Missoula. Meanwhile, median income in Missoula, according to data from the federal Department Housing and Urban Development is $37,800 for one person and $43,200 for two people.
The Index for Missoula, thenm is 65 percent, meaning the average family in Missoula has 65 percent of the income required to afford a home loan for the average property in Missoula.
In 2005, the HAI in Missoula was 68 percent. In 2004 it was 82 percent and in 2004, it was 84 percent. To look at it another way, the report breaks down the availability of homes the average Missoulian can afford.
The report concludes that only 11 percent of Missoula County households had the means in 2006 to purchase a median-priced home. The issue of affordable housing has been brought to the forefront of development discussions in Missoula and it’s not something leaders take lightly.
This year, the Missoula Housing Report also tracked migration to Missoula County, which offers perspective on what the demands will look like on the Missoula market in the future.
Total, Missoula County has grown by about 1.7 percent each year since 1990, which compares to the 1.9 percent each year since 1950. The County saw a big boom of net migration in the mid-90s, but since a peak in 1993, has continued to add about 500 persons per year.
According to data in the report from the University of Montana’s Bureau of Business and Economic Research, about 50 percent of that growth comes from people moving into Missoula County from another Montana county, while 25 percent comes from out-of-state residents with previous ties to Montana and the other 25 percent is from new Montana residents moving in.
SOURCE: The New West
Housing price bubbles and the bursts that go with them aren’t part of the picture in Great Falls, Mont., the Great Falls Tribune reports today.
“We’ve had good, solid, steady growth, not the overnight explosions,” said Beth Duke, a Realtor and broker in Great Falls.
There isn’t a glut of inventory on the market, which is good for sellers, says Jeff Hofstad, president of the Great Falls Association of Realtors.
And mortgage rates continue to be low, about the 6 percent range for a 30-year fixed-rate mortgage, making it a good market for buyers, he adds.
“Great Falls does not seem to be subject to the national trends, and because of that, our housing market is also stable,” Hofstad said.
In fact, single-family home prices increased 13.2 percent from September 2005 to September 2006 in Great Falls, well above the national average of 7.7 percent and beating the Montana real estate market average of 12.9 percent.
Missoula County — a Montana hot spot — saw home prices go up 11.3 percent during the same time period. That’s better than the 10.1 increase during the same time from 2004 to 2005, while a good amount cooler than the 13.7 percent increase from September 2003 to September 2004.
“Things are beginning to happen in Great Falls, we are starting to see activity in economic development,” said Marlene Egan, who just put her two plus two bedroom home on the market.
As always, starter homes, those in the $90,000 to $125,000 range (and most affordable for first-time Montana mortgage applicants), are selling the fastest — if they are in good condition.
“If I had good, clean homes priced below $100,000, I could sell 10 a day,” said Duke.
Part of that demand can be credited to low-interest Montana mortgage loans offered by the Montana Board of Housing and Neighborhood Housing Service for low to moderate income buyers.
“They offer good products to get people into affordable homes and that helps move the market,” said Jason Edmister, a loan officer for Stockman Bank.
The median home price in Great Falls is now running around $143,000 and the average days on market is about 90 days. Quicker sales, especially for homes in good condition, are common.
“For sellers in the $300,000 plus range, it does take a little longer,” Duke said. “And at about $250,000, you start to see potential buyers decided to build.”
The new construction market in Great Falls is also steady, with 245 permits for new homes in 2006, compared with 233 in 2005. New home permits slumped from 1,042 in 2005 to 965 in 2006.
The rest of North Central Montana’s real estate market mirrors Great Falls, according to Mary Blair, an agent with Flynn Realty of Havre.
“We also have people from out-of-state who are investing in real estate here because it’s more affordable housing,” she said.
The market is seeing activity from newcomers, but with people working in a variety of industries and qualifying for mortgage loans at low rates and looking to make the region their home - not just buying for the purpose of an investment property.
SOURCE: Great Falls Tribune
The Billings (Mt.) Gazette observes, correctly, that buying a house and signing mortgage papers can be one of life’s most stressful times.
Just ask Traci Collett. Merely asking a Utah mortgage company she found on the Internet questions about refinancing her East Helena home turned into three years of trouble.
“I was very upfront with the lady in Salt Lake City and said I’m naive about this,” said Collett, then a single mother of three.
Instead of getting more information about mortgage refinancing options, the lender sent her paperwork to sign and the fine print mentioned fees. She assumed any legitimate company would tell her before charging fees.
Not the case.
After she decided to instead seek a mortgage refinance with a local company she could visit in person, the Utah company demanded a $1,100 cancellation fee. Collett disputed the charges and refused to pay.
“A little over two years later, I get an invoice and they wanted $2,403 through a collection agency. Ultimately, I feel they took advantage of me saying upfront that I’m not savvy,” she said.
Montana is one of only six states that doesn’t regulate mortgage lenders except state-chartered banks or credit unions. People who deal with non-regulated companies and feel wronged can’t ask the state for help.
A bill being considered by the Legislature would change that. House Bill 69 requires every lender and mortgage broker to be licensed and audited after October 1.
“Mortgage fraud and predatory lending is on the rise throughout the U.S. and in Montana. We see a need to regulate mortgage lenders who are making loans to Montanans,” said State Banking and Financial Institutions Commissioner Annie Goodwin.
Real estate values in the United States increased by double digits in 2003 and 2004, according to a report by the FBI’s Financial Crimes Enforcement Network. The sharp appreciation and low mortgage rates brought a flood of new home loans and more reports of suspicious lending.
In 1997, U.S. financial institutions reported suspected fraud in 2 percent of all suspicious transactions. By 2005, home loan fraud made up nearly 5 percent of these reports to the FBI.
“In Billings, one closing within the last two years had excessive fees and interest rates,” Goodwin said. “Because we had no jurisdiction, we have to refer that consumer to a private attorney.”
The bill was debated in the House Committee on Business and Labor on January 12.
“Yeah, it’s needed,” said Walt McNutt, R-Sidney, the bill’s sponsor. “I’ve heard about two or three situations around our county where a mortgage lender has done some fraudulent lending on home loans.”
Montana’s banking regulators receive no money from the state’s general fund. They are financed through fees on the companies they oversee.
“Therefore, this bill would charge a licensing fee on mortgage lenders to run this program,” Goodwin said.
Freshman Rep. Ernie Dutton, R-Billings, who is a real estate agent, also thinks it will pass, but he wanted more time for mortgage lender and home mortgage broker groups to respond because some didn’t even know about the hearing.
“They’ve only had a couple of weeks to look at this,” Dutton said. “I don’t think they have big concerns.”
The bill was amended to reflect one of the lenders’ main concerns - Montana mortgage brokers that already pay a fee to the state won’t have to pay a second fee in order to conduct mortgage lending.
Follow the link to continue reading this article from the Billings Gazette …
Forget what the rest of the country’s housing market is doing.
In Flathead County, Montana, home mortgage demand and real estate sales are alive and well, representing the nearly one fifth of the total new-home market in Big Sky Country.
That was just a part of what Kalispell appraiser Jim Kelley and Flathead Valley Community College economist Gregg Davis offered at the fifth annual Flathead Valley Economic Forecast this week, according to the Daily Inter Lake.
Montana West Economic Development invited the two to present a snapshot of the regional economy. First was Kelley’s view from the housing sector.
Tax records from 2005 show that 19.2 percent of all new homes in Montana were built in Flathead County. Of the state’s 8,423 new homes that year, 1,615 were in the Flathead alone.
Powered by low mortgage loan costs and a robust local economy, that far outpaced Missoula County, with 859 homes (10.2 percent of the market), Yellowstone County (Billings) with 993 homes (11.8 percent), and even Gallatin County (Bozeman) with 1,420 homes (16.9 percent).
A quick tour of the area suggests the vigor continues today. But Kelley put some hard numbers to that roadside tour.
Since the mid-1980s the number of homes sold annually has quadrupled, from 454 in 1984 to 1,870 in 2006. However, the average selling price increased nearly seven-fold, from $54,657 to last year’s $356,683.
While outright numbers of homes sold rode a roller coaster that peaked in 1992, dropped and then rose again until it surpassed the former high by 2001, prices never flagged in their steady escalation.
Kelley keyed in on recent trends.
The Montana housing market saw a startling price jump from 2002 to 2003. The average selling price in that period rose from $184,054 to $225,547, representing a 22.5 percent growth. The median price grew by 15.9 percent.
Both were a big switch from single-digit growth. But the exaggerated acceleration was short-lived. Rate of growth for average Montana home prices rose by about a point in 2004, then dropped to just 11.2 percent a year later. Average home prices in 2006 grew by four points.
Median prices, on the other hand, continued their rise through 2005, when rate of growth was 18 percent over the previous year. In 2006 — when the county’s median price was $245,000 — rate of growth was 11.4 percent.
Kelley was quick to silence the naysayers who fear a housing crash.
“Although the rate of increase last year is lower than the previous three,” he said, “it’s still higher than it historically was … The number of sales has continued to increase, too.”
Certainly much of that is due to simple population growth, and that number of people in 2006 was asking for considerably more money when they sold a home than they actually received on closing — nearly as much, in fact.
Although the number is somewhat distorted by a few high-end homes on the market that Kelly said probably never will sell, the average listing price was $699,439. But the average sale price, after the buy-sell was negotiated, came in at $356,683.
“Expectations always have been higher than actual sales,” Kelley said. “This points out the discrepancy in the market.”
Just over 60 percent of all homes sold in 2006 were in the $100,000 to $300,000 range. Listings were in that range, too, Kelley said.
Out-of-area home ownership — something that does not depend as much on where home loan rates stand - is creeping upward. In 2005, 14.7 percent of single-family homes were owned by people who did not live in the Flathead. In 2006, it was 15.5 percent.
“Those could be second homes,” Kelley said. “It will be interesting to track that in the future. I suspect the trend will continue … In the national economy, as baby boomers age they buy second homes that could become primary homes in the future.”
According to the Billings Gazette, Montana’s Bitterroot Valley appears to be keeping the national real estate slump at bay… at least for now.
Hall and Hall, a real estate brokerage firm, recently announced the October sale of a 1,200-acre ranch near Stevensville - for a hefty $14 million.
Closings at the high end of the Montana housing market aren’t necessarily trend indicators, but other factors also point to a relatively healthy housing market in the Bitterroot Valley.
“I really don’t see a big drop in sales. I don’t see a big drop in price,” said Layna Lyons, executive officer for the local Realtors’ group.
“Quite a jump,” Lyons said.
Over the same period, condos increased from roughly $98,500 to $125,000. Bob Pauley, incoming president for the Board of Realtors, said the 2006 Montana real estate market looks similar to the previous year’s market.
“I haven’t noticed a very big dip,” Pauley said.
He said homes in the $200,000-300,000 range have sold well this year for his firm, Private Properties. The firm hired two more real estate brokers, too, for a total of seven.
The national picture appears bleaker as foreclosure rates are up across the nation, according to the National Association of Realtors, which predicted that home sales in 2006 will be 9 percent lower than sales in 2005. Since August, home prices have fallen, according to the association.
National trends, though, can take a while to hit Montana.
“There’s … truth to the notion that there’s a lag time,” said Hall and Hall’s Bill McDavid.
McDavid said the relatively stable market in Western Montana has surprised some buyers, offering more affordable mortgage loans than they’d expected. Many expected to find real estate in Western Montana following the decline in the rest of the country.
While Bitterroot real estate doesn’t appear to be heading into the tank, Lyons said she sensed the market cooling slightly over the summer.
“I can’t say that it was anything real drastic,” she said.
Pauley said sales of homes in the $100,000-180,000 range slowed a little, at least in the past four months. At that level, qualifying for a home loan is a bigger stretch - and market fluctuations tend to carry the most weight.
She doesn’t expect the Bitterroot to experience a crash, but she doesn’t believe the valley will escape unscathed from the national housing market downturn, either.
“I think we all feel like there’s going to be some kind of change,” McDavid said.
Any market fluctuations won’t have a huge effect on parties searching for multimillion-dollar properties, such as the Kootenai Springs Ranch.
“They don’t care to wait for it (the market) to settle. They want it. They want it now. They’re going to buy it,” Lyons said.
And that’s exactly what’s happening. Hall and Hall experienced a record year in 2005, and 2006 looks strong, too. Its partners work with buyers who aren’t subjected to the threat of rising home mortgage rates, McDavid said. Most buyers purchase with cash.
A Montana real estate broker in Bitterroot Valley said Wednesday that the housing market in the valley softened more than the Bitterroot Valley Board of Realtors suggested.
According to the Missoulian, the Board of Realtors executive officer, Layna Lyons, earlier said the market slowed slightly during the summer, but the overall real estate market looked healthy.
On Wednesday, she maintained that position. But Bill Zader, broker and owner of Western Montana Realty Group, said the drop in the Montana real estate market was much more dramatic.
“This summer, it crashed down,” Zader said.
In 2005, he counted 849 sales.
This year, he put the sales at 680.
Zader said he noticed sales were off in spring 2006. When summer rolled around, he noticed that the Bitterroot market was running 25 percent behind the previous year’s market.
“That’s where we are now,” he said.
Sheri Jones, broker and owner of Greater Montana GMAC Real Estate, agreed. Through the end of October, the Bitterroot sales dropped about 25 percent on individual units, she said.
She believes that homes are still selling, but not as quickly. Zader acknowledged that prices rose throughout the Montana housing market in terms of residential properties, though.
“There’s no doubt about that,” he said.
But he wants those selling in a buyer’s market to know that the market has cooled off. He doesn’t want them to have false expectations when they put their houses up for sale.
He said real estate executives want to stay optimistic, but the Realtors paint a picture of the market that was too rosy. When compared with real estate in Florida or San Diego, the market does look rosy.
In some of those areas, sales fell by 50 percent, as working-class citizens can’t begin to think about affording a mortgage loan on even a small house.
Lyons said Wednesday that a number of Realtors in the Bitterroot have told her they haven’t experienced a drop in business this year.
“I don’t see any bubble bursting. I don’t even see a bubble,” she said.
Total residential sales were at 983 this time last year, she said. This year they’re at 811. Zader and Lyons provided different figures because sales statistics can be counted in a variety of ways.
“You don’t really see a big difference there,” Lyons said.
It’s about a 17 percent drop.
Lyons also said that business varies from one broker to the next.
Nationally, residential real estate was down in 2006, even as home mortgage costs remained below 7 percent. But forecasters expect a turnaround toward the end of spring 2007.
Zader didn’t expect the dip to last long, either. He said baby boomers and retirees continue to flock to the Bitterroot for its mountains, privacy and easy access to wilderness.
“Overall, western Montana is going to be a great place for real estate,” he said.
A reader of Montana’s Billings Gazette was disappointed in a recent article about the area housing market. The article essentially said, according to the reader, that “house prices still rising and Realtors think they’ll go up forever.”
Much more factual support and critical analysis than that should be offered in the opinion of this resident. Especially seeing as the article mentioned three ominous market trends for readers who read between the lines.
Completely unmentioned in the article is the real problem: whether or not there is enough affordable housing and why. The area’s high prices must be supported by high-salary jobs, which Billings has few of. House prices are up 50 percent in five years, while wages are up about 15 percent.
Irrational prices can be sustained only temporarily with risky interest only mortgage loans and speculation. At some point fundamentals have to kick in and a correction must occur.
Hopefully no one relies upon Realtors to publicly predict (or even allow for the possibility of) a downturn. Gazette articles from the ’80s show relentless Realtor optimism all the way through the crash. A Realtor may have the data and may be the “expert,” but hearing their quotes in The Gazette does little to tell us of actual market conditions.
Be sure, as you begin your Montana mortgage quest, that you know what you are getting into and have a feel for the real state of the market.
Bobby Young looks at the headlines and TV talk about a significant slowdown in the real estate market and shakes his head. Is it happening in Great Falls? No way, he tells the Great Falls Tribune.
In the real estate broker’s opinion, the local housing market’s best days are likely in the future, not the past.
“Our market, in my opinion, is not slowing down like it is nationally,” Young said.
Still, the national market has been an attention-grabber. The median sales price of new homes in September was 9.7 percent below year-ago levels, the biggest drop in 35 years. In the same period, existing home sales fell by 14.2 percent from September 2005 throughout the U.S.
But sales data and price comparisons from June 1-November 1 show no sign of big changes in the Montana housing market.
There were 429 sales of single-family homes in the five-month period this year, up slightly from 414 in the same period a year ago.The median price in the same period of 2006 was $140,000. The median last year? $129,000.
The numbers paint a picture of a healthy, sustainable housing market, said David Munroe, president of the Great Falls Association of Realtors.
“While real estate activity often slows as the holidays and winter approach, I don’t expect any real slowdown. We didn’t get a big rise like everybody else did. We don’t get any crashes,” Munroe said. “I don’t see any kind of a bubble, any kind of a dip at all.”
The numbers for Great Falls and Cascade County also look solid in terms of home construction as many potential buyers can still qualify for a mortgage. Montana builders reports that housing starts are almost exactly on pace with where they were a year ago.
But what does the future hold? Opinions vary.
Paul Polzin, director of the Bureau of Business and Economic Research at the University of Montana, says the market statewide is slowing. Polzin notes that increases in real estate prices in Missoula and Bozeman, along with parts of the Flathead Valley, kept pace with a national run-up in recent years — and are hence vulnerable.
“I don’t see any reason why we shouldn’t be part of what’s going on in the rest of the nation. I think there was some kind of bubble in Montana,” Polzin said.
In recent years, Bozeman has enjoyed a red-hot real estate market, driven by parents buying homes for students at Montana State University, retirees looking for a relaxed lifestyle and former residents returning to their home state, according to Donna Kostelecky, president of the Gallatin Valley Association of Realtors.
“With the Internet, people can live anywhere, and places with great scenery and outdoor recreational opportunities provide plenty of appeal,” she said. “Things have slowed down in comparison with a year ago,” Kostelecky said. “But the market is still very good. Buyers have a larger selection today than they had a year ago.”
What happens with mortgage interest rates, which have creeped up a little bit from historic lows in recent years, could have significant impact in the real estate market across Montana.
As is the case anywhere else, when the bargaining power of potential buyers is threatened by higher home mortgage loan expenses, demand for homes is likely to decline.
“As long as we can keep interest rates down, we will be in good shape,” said Kostelecky.
Young agrees. Rates last week ranged from about 5.9 to 6.25 on 30-year Montana mortgages, with rates on 15-year loans slightly lower.
“The mortgage rates are still phenomenal,” Young said.