The Point of this Page
Hi, my name's Doug. In summer 2005, I began researching the Billings housing market. The longer I looked, the more I began to believe that the Billings market was in the midst of a bubble.
A housing bubble is defined like this: "A housing bubble is characterized by rapid increases in the valuations of real property such as housing until unsustainable levels are reached relative to incomes, price-to-rent ratios, and other economic indicators of affordability. This in turn is followed by decreases in home prices that can result in many owners holding negative equity, a mortgage debt higher than the value of the property. Bubbles may only be definitively identified in hindsight, after a market correction" (from Wikipedia)
Now that may sound ridiculous to you. A housing bubble in Billings? Those only occur on the coasts, if at all. You can still get a very good house here for $200,000, while Californians are pushing half a million. Our prices are still cheap and everyone wants to live here. Right?
Asset bubbles are complex things. I think that a number of factors have led to the unprecedented nationwide housing boom, and Billings has not escaped any of them. Among them are very loose lending standards, risky loans, speculation, and psychology (the "expectation of appreciation").
Everyone thinks real estate is a good investment, no matter what. Throw away those old standards when buying a house (20% downpayment, plan to stay 7+ years). It's just like 1999 and stocks all over again. It's a mini-mania. There's no way you can lose. Until you do.
When you hear real estate market conditions, most of them come from Realtors or others in the industry. No offense to Realtors, some of them are really good. But they have a definite interest in a booming housing market, and some of them make overly optimistic or even reckless statements in order to support it.
It's hard to get an objective look at the housing market. This is my attempt to provide you with that. The point of this page is to raise awareness about the Billings housing boom. And to get you to seriously consider the idea that this boom may go bust and cause a lot of pain.
A house purchase is the most expensive item most people ever buy. It is foolish to not be prudent on such a major purchase. So consider the possibility that prices won't go up forever. Consider the possibility of a downturn. Most Realtors dismiss these ideas outright. But most Realtors have short memories.
In September 2006, I gathered all my data, took some photos and videos around town, and produced a video about the Billings market. It's amateur, self-narrated, and long (20 minutes), but makes the best case I know how for an overheated Billings market. Take a look.
Original Video
December Update
That's my story. Have a look on this page, and let me know what you think!
billings @ topoimagery.com
It looks like the comments work. Feel free to leave one. Thanks!
Doug nice site and great video. I think you'll find that the issue of possible housing bubbles is pretty much global. In Ireland we have witnessed extraordinary house price inflation for several years. The market has slowed recently, and the media is starting to ask if the bubble has popped.
Keep up the good work.
Awesome work, thank you! As a recent first time buyer I found your video to be educational and I will certainly recommend it to others. Again, thank you!
Thank you so much for the effort you have put into researching the housing bubble in our area! It is obvious that the Billings Gazette is only going to sugar-coat the whole bubble issue, so people like yourself are invaluable to people like us who are in the market to buy right now. :)
Doug,
Nice job. I loved the video. I wish all the realtors would do their homework like you did. I am a Realtor and I study the trends too. I agree with you that there is a chance that the bubble in Billings is going to burst. It is already showing signs of a decrease. We do have a high inventory of houses right now, due to the overbuilding in the new construction market. The prices of these new homes are very high. Not many people in Billings can afford these houses. I know I can't! Sellers also still have high expectation of what their home is worth when they put it on the market. Prices are dropping and we as professionals need to educate the people of this trend. Thank you for your hard work.
Danny Sandefur
ERA Super Star
Billings
Looks like you pick and choose which comments you will post. Where is the one sent yesterday questioning your article?
Anon-- I do not pick and choose, and I do welcome dissenting opinions. I only have moderation turned on to remove spam. If you're the same Anon, your comment was under the Gazette Bubble post. See it and my reply there.
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Hi Doug,
I blog on thehousingbubbleblog.com and meet you there several days ago. I'm from Bozeman and I think the housing bubble blogs are many and well established. I like Dr. Bubble blog most because it features "The real homes of genius" almost daily. I think this is a fabulous idea because pictures along with outrageous asking price is suite for our ADD web consumers (I count myself sometime). To motivate you to start this, I nominate this two door garrages with a house attach to it in the back http://www.prudentialmontanare.com/detail.php?mls=138815
Let me know what you think
Cinch
Great site! You should visit city-data.com's Montana forums. There is a lively debate on several of the forums right now regarding Montana housing prices in regards to our wages.
Well done Doug! I too appreciate an honest approach to looking at what's going on in Billings with the housing market. Pat
Thanks for the great work on your video and housing statistics. Our house is on the market right now in the $220K - $250K range. We are not optimistic about selling, even though everyone loves our house and the realtors tell us it is priced right. I asked our realtor to provide statistics on what has sold on the West end in the past 6 months in our price range. The answer was "0". There are 7 total in a pending and contingent status right now, but that's it. With the tight credit situation, I wonder how many of those 7 will fall through. The house that we have an offer on has been on the market for over 6 months and the sellers had to drop the price twice before our offer. There is a lot of inventory out there right now!