Why now is a SMART time to buy!

Daily Real Estate News | March 11, 2008

Why Now is a Smart Time to Buy
Now is a great time to buy a home, say the financial gurus at the Wall Street Journal.

The Journal calls it a buyers market and offers these suggestions for first-timers getting their feet wet. While their advice is solid, it’s not revolutionary, but some potential customers might find it reassuring.

Remember this is a place to live not a stock market investment, they say. Lenders want buyers to spend no more than 28 percent of their gross monthly income on mortgage payments, real estate taxes, and home insurance. Buyers shouldn’t count on stretching further because lenders won’t approve their loans.

Cash is king. Having enough money in the bank to pay closing costs that are typically an additional 2 percent to 3 percent of the price of the home is necessary.

Read More…

State of the Market – Bozeman, Montana

As we reflect on last year from a real estate perspective, the general consensus from those in the building, lending, real estate and related industries is relief that 2007 has come to an end. The local market in general saw lower numbers of sales, and yet several segments of the market experienced higher than average sale prices from the previous year. Marketing conditions and industry sentiments, so far through January 2008, seem guardedly optimistic, with many real estate firms and title companies showing an increase in the number of closings and pending transactions from 2007. Property showing activity has increased dramatically since the holidays, and more importantly buyers are writing offers, and sellers are accepting those offers. Though some buyers are still waiting for prices to go lower, market timing is very tricky, if not impossible, to execute perfectly in the real estate business. Many buyers are finding that lower interest rates coupled with seller incentives to discount prices, offer upgrades or participate with interest rate buy-downs, make this a very attractive time to buy. This renewed market activity is a “key indicator” to the return of a more stable and balanced market. Of special note, the Big Sky market has experienced increased showings and a renewed buyer interest after having a very flat 2007. I have always thought that good snow conditions can cure a lot of economic woes. And the simple fact is the more foot traffic we have in Big Sky, the stronger business activity we will have across our region.

Let’s take a look at a few of the numbers from 2007. Also, please see the companion piece by Nicole Ritter in this issue of BTB which further explores and analyzes the numbers. All information is compiled from the Southwest Montana Multiple Listing Service (SWMLS).

Within the Bozeman city limits, the condo and townhome dominance trend continues to grow. For the third straight year, attached housing sales have surpassed single family detached housing. Both affordability and availability drive this ever increasing market segment. There were 425 condos and townhouses sold in 2007 which compares to 433 in 2006. Average price for in-town condos and townhouses was $234,936, up slightly from 2006’s average of $228,269. There were 331 single family homes sold with the average price reported at $337,683. For 2006, this same category included 379 sales units with an average price of $348,766. Even though average prices are down year over year, 2007’s average of $337,683 is up by 8% from 2005’s average of $312,723. It is important to stress that average sales prices are impacted by many factors, including land prices, building costs, design trends, square footage, etc. and have no direct correlation to appreciation or depreciation rates.

Statistics from the City of Bozeman ’s Building Division website show a noticeable increase in the new construction trend. The city issued 758 housing unit permits in 2007 compared to 670 in 2006. Furthermore, the total valuation of all building permits for 2007 increased to $243,751,248 from $192,676,993 in 2006.

The Belgrade market area is one of the more stable in our region. Belgrade ’s available residential inventory has actually decreased in the past year. As of January 1, 2008, there were only 147 single family homes available for sale in comparison to 153 at the beginning of 2007. Condo and townhome inventories are down as well from 54 units to 37. Lower supply is another “key indicator” to market stabilization. Belgrade serves many first time buyers, with an average sales price $50,000 lower than within the Bozeman city limits. The number of single family homes sold in 2007 decreased slightly to 268 from 284 in 2006. There was also a small decrease in the average price from $295,397 to $284,834. The Belgrade condo and townhouse market has slowed also in the number of units sold from 163 in 2006 to 114 in 2007, but it shows an almost 5% increase with the average sales price rising from $149,375 in 2006 to $156,499 in 2007.

The Livingston/ Park County market is also worth noting. Although the in-town single family home sales decreased in the number of units, the average sales price rose again last year to $212,773 from $203,772 in 2006, an increase of 4%. The in-town condo and townhouse market, an emerging trend in Livingston , experienced substantial growth in the number of units sold with an increase from 19 units in 2006 to 37 in 2007. The average price also increased to $171,686 in 2007 from $141,134 in 2006. The rural areas of the Park County market showed slight decreases with the total number of residential transactions declining from 74 to 68 last year. However, the average price in this segment did increase from $349,368 to $357,731.

Sales of vacant land and subdivision lots slowed substantially in 2007, caused in part by record numbers of existing homes for sale. Within the Bozeman city limits, the average price increased from $114,637 to $137,691 (a jump of 20%). Please note: this statistic also includes a number of multi-family lots and does not reflect an average sales price for a single family lot. The average sales price of land in the surrounding Bozeman area increased by 43%, and Park County experienced a 21% increase in average price. There is still an abundance of inventory in this market segment from subdivision lots to large acreages in all price points. In the city of Bozeman as of year-end there were 654 available lots for sale and in the area immediately surrounding Bozeman , 618 available lots. Belgrade had 174 lots for sale, and the Manhattan/Three Forks area had 661 lots in inventory. The good news for buyers is ample availability and choices.

In conclusion, it is important to always keep in mind that the numbers reported are somewhat inconclusive when telling the whole story. There are many “pockets” of price ranges that are faring better than others or even certain neighborhoods that go against the norm of the market as a whole. Luxury and specialty properties are bucking the national trends with water amenities and larger acreages in high demand. Positive market signs include our growing employment base coupled with extremely low unemployment and continued national attention for the region as a prime retirement and second home location.

Robyn Erlenbush is owner of ERA Landmark Real Estate (with offices in Bozeman, Big Sky, Livingston and Clyde Park) and Intermountain Property Management. She can be reached at robyn@eralandmark.com.

Visit us at http://www.eralandmark.com/ and http://www.StuartandSally.com/

So sad, the trickle down finally gets to Montana…

“A national slump in housing starts and the shaky health of the home mortgage industry are key factors in RY Timber’s decision last week to temporarily shut down its mills in Townsend and Livingston.”

Read More: Click here!

By MARGA LINCOLN
Independent Record

Published 1/20/2008

Yes, it’s finally happened. It finally came and is effecting us here in Bozeman/Livingston area. Because of the slow in the housing market in the rest of the U.S., our timber community has been negatively effected. Read the article to learn more about how this happened.

 

Subprime Mess – April 2007

Published in the Bozeman Chronicle, April, 2007.

Unless you have been on vacation for the past month, you have probably been exposed to the latest prime-time real estate phenomenon of “subprime” loans. You have heard it on the nightly business news, read it online, and seen countless articles in the national and local newspapers and business journals. So what are the facts about subprime, how might it affect your borrowing power and impact our local marketplace?

First, how did we get here? I think David Lereah, Chief Economist for the National Association of REALTORS,says it best, “Just as children in an orderly classroom stir up a wild ruckus when the teacher leaves the room, some people and businesses stray from fundamental behavior during a frenzied market environment. It happens every time. During the savings and loan crisis of the 1980s, S&L senior management wastefully purchased expensive fine art while their institutions were crumbling. Investors purchased company stock at triple-digit price/earnings multiples during the giddy 1990s dot.com boom, ignoring fundamental investing principles. And in the aftermath of the nation’s biggest real estate boom, we learn once again, about behavior in a frenzied environment… the subprime mess.”

The subprime crisis is referring to a certain variety of home loans which are currently experiencing heavy rates of both default and foreclosure. The loans are targeted towards those with low credit scores, little or no money for a down payment, or are otherwise unable to qualify for a standard, conventional loan. Lenders, who were attempting to make the most of the housing boom, offered interest-only loans, loans with payments that did not even cover the interest, and some loans where the borrowers were not even required to have employment.

The subprime market encompassed almost one in five total mortgages over the last year. Many of these loans were made with fixed rates for the initial two years, and the two years are up, so the loan payments are being adjusted heavily upwards. Since the loans already carry a higher than normal interest rate due to their risk, homeowners are quite often unable to keep up with the dramatic increase in their monthly payments. Over 8 million of adjustable-rate loans (25 percent of which were subprime) were originated during the past three years. First American Corelogic estimates that about 1.1 million of them totaling about $326 billion are likely to end up in foreclosure. A bit over $300 billion of subprime adjustable mortgage loans are due to re-set by October 1st of this year.

Although seemingly a startling new topic, these types of loans have been around for many years. In the recent years, when the housing prices were increasing at a steady pace, a homeowner had a wide array of options when their loan was due to adjust. They could put the home on the market and ideally make enough of a profit to move on; they could simply refinance the home with the equity they had acquired while living in it; or if it did come to foreclosure, the higher value of the home would quite possibly cover the foreclosure costs. Because of these factors, lenders were willing to keep taking on additional risk. Now that housing prices have leveled off across much of the country, this strategy is more difficult. Additionally, if it does come to foreclosure, these borrowers who purchased homes that they truly could not afford not only lose their homes, but any down payment they have made, the cost of any home improvements, and their credit is further damaged.

Clearly, the recent fall-out has stifled subprime lending activity today and may influence prime lending practices of tomorrow. Many subprime lending companies have closed their doors and their sources of funds-the large banks and Wall Street-have tightened credit. The regulatory agencies have proposed stricter subprime lending guidelines, emphasizing sound underwriting, greater documentation, a debt-to-income analysis that includes taxes and homeowner’s insurance, and qualifying borrowers on a fully indexed mortgage rate rather than the starter rate. The lending pendulum will swing away from no-doc loans and creative adjustable options. As a borrower, look for more traditional approaches with more emphasis on payback ability and credit worthiness.

What does this mean for our local marketplace? The short answer is no substantial impact. Even though certain segments and geographic regions of the housing market will be affected by increased foreclosure troubles in the subprime sector, we should see less pressure on a local level. Factors favoring our region include the quality of local credit and the lack of true market speculators. This is not to say that we are totally immune from subprime woes, but just as the housing bubble is not an “across the board” national epidemic, neither are subprime defaults equally spread across the nation.
Robyn Erlenbush is owner of ERA Landmark Real Estate (with offices in Bozeman, Big Sky, Livingston and Clyde Park) and Intermountain Property Management.