My housing videos give you an informative, entertaining look at the Billings housing market. They are the main feature of this page. Click on the image to check them out.



And here is a nice at-a-glance map showing change in sales and prices in major Montana markets. I will update this when I find new stats. Source information here.



Scroll down for the latest information and updates. You may contact me with questions, comments, or information at this address:


Thanks! Keep up on the latest using the feed link - Doug

This past weekend, I biked around town to see the spring construction hotspots in Billings. The result is the following video showing dozens of residential construction sites in 18 subdivisions around town.

This was a fairly quick project, so please excuse the shaky camera and wind noise. Running time is 10:52.



Note that this video has been filmed in high definition. But you'll need to click here to view the HD version (the video above plays in standard definition). It takes a fast computer and a fast connection, but the quality improvement is worth it.

Are Montana banks really safe, conservative lenders that can easily weather a downturn? Now you can judge for yourself. The Bank Loan Performance site has aggregated FDIC filing information so you can quickly view total loan values, portfolio allocation, and delinquency rates for major U.S. banks.

Here's a quick summary of delinquency rates on banks with a major presence in Billings:

Housing statistics in Billings have been grim over the past year, but the latest figures show some improvement. Is Billings seeing a so-called Spring Bounce?

May home sales are up over the same month in 2008:

Construction has also improved, halting its precipitous slide in May and equaling May 2008. However, this still represents a 50% drop from 2007.

Finally, Yellowstone County unemployment declined to 4.6% from 4.7% (which means I was wrong in this post!). For now, Montana is showing strikingly good employment numbers.

One monthly blip does not make a trend, so we'll have to see how the rest of 2009 plays out.

This is a very interesting e-mail I received recently (printed with permission). Jared lives in Bend, Oregon and believes that the rapid rise and fall of that market might give us here in Montana a clue about the future of our housing markets. I think there's a lot to learn from this.

My name is Jared, I grew up in Idaho but have lived in Bend, Oregon for the last five years. I moved here amidst a boom that appeared as if it would carry on forever. At the time, I was 24 and looking to buy a home with my wife. All my 20-something friends were uttering the standard matra "You have to buy now, real estate only goes up", "Don't get priced out of the market", "Bend is the new Aspen, we've been discovered" and on and on. So my wife and I went to a mortgage broker and were approved for a $300k loan on an annual income of $60k. At this point we could have jumped in head first, but I took a deep breath and asked a simple question
"Why?".

Why is this happening?
What is driving home price gains?
Who can afford to actually live in these homes?

Well, six months of research and I was confident that we were in a housing bubble. A national housing bubble. And as I mentioned my thoughts to my friends, It was almost as if I were the fabled biblical character Noah. I knew the flood was coming, but no one was listening. Worse, I often was met with anger when I mentioned my contrarian views to my circle of friends. So I went in search of more proof and ended up writing a computer program that gathered property data from our county website. This program put the data into a database that I could then pull trends from. With it I created a tiny website.

Around the begininng of 2008 the wind had been let out of our sails, not only the sails of Bend's RE market but of all Central Oregon. Yet we were not seeing large decreases in property sales. And I started to doubt myself. You see, I had been waiting to purchase a home for 3 years but prices were not making the large moves I predicted. So I wondered if we just wouldn't see large price declines. If we would just be left with a giant run up in prices but no run down. Even though all the data was screaming "We still have a long way to go", the message wasn't making it to my brain. It was being lost against the media and NAR blitz of "Best time to buy in 20 years" or "We finally cought up with the rest of the nation, and are leveling out", and my all time favorite "It's a buyers market".

At about this time, and to my great luck, I had a conversation with a new friend. We both shared a passion for economics but even better, we both were tuned in to what was happening with the housing market. With his help we laid out all the data, facts, and yes even gut feelings. We debated for hours and hours over the span of many months and ultimatley this allowed me to have just a little more patience. The patience I needed to sit on the side line and wait it out.

So fast forward 18 months. It is now May 2009. Here are some statistics that I think will blow your mind.

2007 Median Home Price = $396,000
2009 April Median Home Price = $220,000+/- 5% (And falling off a cliff)
Our unemployment numbers are apocolyptic! @ 17.1% (and rising)

I write this, because I recently spoke to a buddy in the Bozeman area. And the story concerning the housing market there sounded exactly like Bend's, just a little behind the curve. California has been the forcast data set that I have used to see where we (Bend, Oregon) are headed. And in the same way, I think you could use Bend to see where many of Montan's communities home prices are moving towards. After looking at the data, I see Billings and Bozeman (and most of Montana) as being about 12-16 months behind us (Bend, Oregon). Make no mistake, it is a certainty, the data doesn't lie. Home value/price destruction is coming your way, Montana cannot avoid it.

So to anyone on the fence, my encouragement to you is wait at least 12 months and see where things are headed. I know that you will be extremely thankful (as am I) that you waited. Feel free to post this letter.

-still renting
jared f.

Thanks for the great story, Jared. In a future post, I'll examine some of the similarities and differences in these three markets.

There are many, many vacant houses in Yellowstone county. Every now and then, you can find a killer rental deal for just a fraction of what you would pay to own. Here's one:



It's a 3500 square foot house, 5 bedroom, 3 bath, 2 car garage, theater room. Subdivision is Copper Ridge, off Rimrock west of 62nd.

The owner purchased it in 2006, then listed it for sale just a few months later. This house has been on and off the market ever since, asking anywhere from $359,900 to the current $399,000.

It has also been for rent, asking $2800/month. But high-end rentals can be a tough sell. So the asking rent per month has been reduced drastically to $1000. Here's the explanation given:

This is a short term rental-approx. 4 months. Normally rents for $2800 per month, but reduced due to short term status and need for yard to be cared for.

So you can buy this house for $400K (approximate PITI is $2750) or rent it for $1000/month.

How would you like to live in this 3 bedroom, 1 bath South side house for only about $3000 a month?



No? Would it help any if I told you that it's right near the lovely Jackson/Monroe/Jefferson rowhouses? Still no?

This actually happened. By purchasing in March 2008 and then selling for a loss 14 months later, this owner has effectively paid $3,000 a month to live in this house. Sort of. Keep reading.

Here's the story: The owner acquired this house in March 2008, and took out a loan for $130,469. Less than a year later, he then tried to sell it. Nobody jumped at the $144,900 asking price. So the price was chopped to $119,900. Still nothing. Now it's reduced again to $109,900.. at least a $20,000 loss (-15%) in just over a year.

If it sells today for $109,900, here is what the final cost would be for 14 months of living (even before utilities and maintenance):



Now, the above is what would happen if the owner sold today for the full asking price and had $25k or so to bring to the closing table. This is important: If the house sells for the current asking price, the owner has to bring about $25,000 cash to the closing table just to get it sold.

In reality, the "owner" can't cough up the $25k. He couldn't even make the mortgage payments starting last fall. This house is now scheduled for a June 8 foreclosure sale. Since the bank really doesn't want to foreclose, they have agreed to a short sale. This means that they'll take less than the full loan amount and take a loss just to get the house sold. The seller takes a credit hit, but gets debt forgiveness. But so far, there are no takers even at $109,900. June 8 is coming fast.

And how about the lender? GMAC Mortgage made and currently holds this loan. They're taking a big loss on this house no matter what happens. So the bank made a poor loan and now the bank gets to pay for it. Right? Wrong! GMAC has already received billions in government bailout money for their foolish practices, and just today they received $7.5 billion more. If you are a taxpayer, you are paying for the bad decisions of the borrower and the lender for this house. If you don't like that, contact Baucus, Tester, and Rehberg to let them know you want the government out of the mortgage business and out of the bailout business.

Back to the personal finance side. This story should hammer home a point I've been trying to make for awhile: Regardless of the long-term performance of the Billings housing market, you can find yourself losing a lot of money in a short time. Maybe this owner thought he was in it for a long-term investment. But life happens sometimes, and he may have experienced an income disruption or needed to relocate quickly. Unfortunately, the supposedly bulletproof Billings market had tanked in the meantime, and now he is facing foreclosure.

I'm not in the business of giving financial advice. But if you're thinking about buying in Billings, I would strongly recommend a 20% down payment, extra cash reserves, and the ability/willingness to endure a considerably drop in home values. Don't become a foreclosure statistic.

Here's a graph of home sales so far this year in Billings, compared to last year. (Source is Howard Sumner's blog).



Sales were very weak in April. In fact, there were actually fewer closings in April than in March-- very unusual going into the spring selling season.

Consider the incentives that there are to buy right now-- incredibly low interest rates, and an $8,000 first time homebuyer credit. Even with these, sales are still dropping. This is surprising, and particularly ominous when you consider how much farther sales could drop when these incentives inevitably go away.

And speaking of Sumner, the Big Sky Business Journal printed a Letter to the Editor that is a nice response to Sumner's claim that Billings housing has been a better investment than the stock market since 1968. The letter (whose author reads this blog) has two simple, but effective arguments: 1) The average house size has increased in 40 years, so you can't really compare the 1968 average price to today's average price, and 2) Sumner neglects to include dividends in his math, which greatly increase the value of a stock market investment.

Sumner now has a blog post stating that it's better to be in Billings real estate-- where we're back to 2007 values-- than in the major U.S. cities (back to 2003 values) or Fortune 500 stock (back to 1998 values). No mention about the potential for future declines... And he also has a write-up about how few subprime mortgages Billings had.

By the way, subprime is not the real problem and has never been the problem. While subprime became a big buzzword last fall, subprime troubles were only the first indicators of the massive credit crisis that has swept over us. Alt-A and Prime defaults are heading up fast, and may cause even bigger trouble. I think Billings can see a major downturn even without much subprime influence.

Do you remember last year when Congress passed a series of bills aimed at helping struggling home-debtors? Turns out that they helped embarrassingly few people.. one, to be exact! So what does Congress do now? They decide that the requirements were just too strict, and they're going to try again:

Trying to curb home foreclosures, the Senate voted on Wednesday to make it easier for homeowners with risky credit to switch to a lower-cost mortgage backed by the government

Risky credit ... backed by the government. Sure, why not? What could go wrong here?