Gazette claims 'No Bubble in Billings'
Well, well. The Billings Gazette finally did a housing article, and what do you suppose they titled it?
No 'Bubble' in Billings
I'm not going to post a full critique, because this article contains very little new. Just some Realtors talking about how house prices have been going up, so there's obviously no problem. No mention of multiple price reductions, or much of anything else to indicate future trends.
One interesting part of the article is the reader comments at the bottom. Many of them saw through the spin, and many pointed out the affordability problem.
I did write a letter to the editor. It was not printed, though. Edit: Took 'em awhile, but the letter was printed on 12/3. Here it is:
Dear Editor,
I was disappointed with the partiality of your article about the Billings housing market. The article essentially said, "House prices still rising and Realtors think they'll go up forever." I expected much more factual support and critical analysis than that.
Actually, the article mentioned three ominous market trends for readers who looked closely. First, inventory is way up. Second, days on market are increasing. And third, sales have slowed considerably lately.
Completely unmentioned in the article is the real problem: Affordability. High prices must be supported by high-salary jobs, which Billings has few of. House prices are up 50% in five years while wages are up about 15%. Irrational prices can be sustained only temporarily through the use of risky loans and speculation. But at some point fundamentals have to kick in and a correction must occur.
I hope no one is relying on the Realtors to publicly predict (or even allow for the possibility of) a downturn. Gazette articles from the 80's show relentless Realtor optimism all the way through that crash. Realtors may have the data and may be the "experts", but hearing their cheery quotes in the Gazette does little to tell us of actual market conditions.
I'd encourage anyone to talk to a home seller or straight-shooting Realtor, and many of them will give you a much different picture of the market.
Doug, perhaps it would do you well to know the facts better. Housing inventory in Billings has dropped steady since reaching a peak in August. The number of sales are up for the year, as well as the average price.
Aside from your attack on Realtors I fail to see the point of your article. Realtors have never said or even implied that prices will continue to go up forever. That would be a point made by a novice not an experienced Real Estate Professional. Supply and demand has worked in the past and continues to work making it possible for price adjustments when needed. It's been a known fact for years that the wage base in Billings needs to increase to keep pace with inflation. Billings area Realtors have been and continue to work with the city, the chamber and the Economic Development Council trying to attract and bring higer paying companies to Billings. There is also ongoing work by Realtors addressing the need for affordable housing. Increased taxes through mill levies, increased cost of development fees, increased cost of materials and a shortage of skilled labor all contribute to increased cost of housing.
Suffice it to say that housing prices have gone up in Billings, but thankfully the increase has moderated to a healthy slower pace then the robust years of 04 and 05. No, there is no bubble in Billings and there is no bust.
I am concerned about the people who because they have listened to the national media have decided to wait to purchase because "prices are dropping and will drop further," while the truth is that while waiting, prices are increasing.
If you are concerned about the issues like Realtors are I invite you to work with us on these issues not against us.
Thanks for your comment, Anon. I like to hear from people in the industry, even those I disagree with.
You're right that inventory has dropped in the last few months. I will mention that in an upcoming statistics post. This is a typical seasonal decline, and I have (anecdotal) reasons to believe that much of the decline is due to people who are pulling and waiting until spring. In any case, inventory is still well beyond last year's number. I expect that it will begin to tick up in January like it did last year. The point stands: Inventory is high from a historic perspective.
I think Realtors have absolutely implied (in the media) that price declines are extremely unlikely, and thus that prices will pretty much go up forever. How about these lines from seasoned local Realtors: "good solid return on your investment", "Billings is absolutely bullish", "steady growth...will continue the next 10 years, at least", "We've had steady growth in this part of the country and have continued year after year to be a little bit better than the previous year."
I have even heard a recent homebuyer say that Billings was a good place to buy because we don't see booms and busts here. I think that's a Realtor-created perception. So yes, I would say that many Realtors have implied that there is little if any downside risk.
I am glad that price increases are moderating here. Rapidly rising prices aren't really good for anybody. But what are the chances that the biggest boom in recent memory could be followed by a "normal" market with no correction? Maybe it's possible, but we'll have to wait and see.
Just so you know where I'm coming from... I have been watching this market since summer 2005. While TIME magazine had a guy hugging a house on the front cover, I was digging deeper and noticing problems on the national level. I looked into the "housing bubble" concept well over a year ago, and saw problems in the Billings market as well. Some people may have been spooked by recent reports, but my perceptions were forming when housing was (according to the media) still a great investment.
Full disclosure: I am a renter and own no property. My original plan when researching the market was to pay off student loans, save $20k or so, then buy a house. Since then, though, I've really gotten a clearer picture of all buying entails, and much of it doesn't appeal to me at this point in my life. Even if house prices seemed reasonable, I would not buy now. I enjoy the flexibility and low risk of renting, not to mention the low cost compared to buying now. Call me bitter, call me noncommittal, or whatever. Renting just makes sense for me and I enjoy it.
I am very much "concerned about the issues." And I know that, if housing has a significant downturn, people are going to get hurt. That includes first-time homebuyers and people that didn't know any better because they thought they were buying into a market of "steady growth." My web page and video give them an alternate take on the market, so they can know what they are getting into.
My purpose isn't to "work against" Realtors, but if our opinions on the market differ then I guess I have to. How do you propose that I work with you?
If the market continues to climb for the next year, then I'll admit I was wrong, I'll go away, and life will go on. But we will have to wait and see.
I really have nothing against Realtors, and even if some of my posts sound like "attacks", I'm really a nice guy. Send me an e-mail and I'd be happy to take you out to lunch some day so we can talk about this stuff more.
"I did write a letter to the editor, and received a call to verify my identity. It was not printed, though."
Funny, that is where I found your website.
Whoops, I glanced at the Gazette on-line today and missed it. Thanks retail..