Whose Prediction are you Going to Believe?
In the last few years, dozens of publications and organizations have attempted to predict which cities will have the best housing markets. Most of those were overly optimistic. Then you've have Realtors making continually rosy predictions, and small voices like mine warning of potential trouble.
So whose predictions did you believe then? Whose do you believe now?
Enter a website called HousingPredictor.com. You may have seen it splashed all over Montana media in the last week. Here is their forecast for 2009:
They predict Billings to be the #2 market in the country with a 3.1% price increase in 2009. In addition, Bozeman, Great Falls, Missoula, and Livingston are all going to be positive according to them.
Fine, everyone's entitled to their opinion. According to the website, here's the methodology they use:
We examine more than 20 micro market characteristics in each market place, including income levels, employment trends and changes, school enrollment, business trends, regional political influences, real estate sales history and current housing market velocity. The factors are all considered to come up with each local market forecast.
While Yellowstone County still has low unemployment and has actually added positions lately, I'm not really convinced that $12/hr Cabela's jobs are going to pay for a whole lot of $200,000 houses. And as for business trends, perhaps if HousingPredictor could see the local business climate they might change their minds:
HousingPredictor.com contains no real information about who's behind the site, and it's also hidden from the domain registration information. But as noted here, HousingPredictor is actually run by Destin, FL real estate agent Mike Colpitts.
The 2008 predictions are conspicuously missing from the site now, but I've got an archived copy so we can see how the site did last year. In the table below, I compare HousingPredictor's 2008 predictions with the actualy market performance from OFHEO House Price Index (where available). All figures are percent change in house price.
Due to lack of 4th quarter data availability, percent change shown is actually Q3 2007 through Q3 2008. In most cases, declines are accelerating, so final figures will be even worse than shown.
Over half of the predicted top markets in 2008 actually went negative during the year. With this track record, how well do you trust HousingPredictor with its 2009 predictions?
Here's a prediction for you from someone who actually lives here and has been monitoring this market for years: Billings, Bozeman, and Missoula will not see positive house price growth this year. Now let's see who's correct.
Even though still low, the Yellowstone County unemployment rate crept up in December to 3.5% from 3.3% in November.
The bigger problem is not unemployment though, but affordability. Those $12/hour jobs don't buy much house, and I've heard something about Californians no longer being able to sell their houses and walk away with a big profit. I wonder who is going to be buying all the high end houses in Billings?
Here's another prediction.
"The residential real estate market will likely remain flat through 2009, with even the possibility of some declines in the first quarter, predicts Billings real estate broker Howard Sumner. Sumner closely tracks local housing market statistics."
http://journal.bigskybusiness.com/index.php?name=News&file=article&sid=543
I saw that, Anon#1. Remember when Sumner said that house prices would go up 6-10% a year? He was wrong then, and now he's wrong again.
Heh, I didn't see that previous prediction, good to know.
On his blog a few months ago he posted that Billings housing was affordable, or pretty close to it, for the average household. I submitted a comment challenging that assertion, with my own calculations on affordability, but for some reason my comment never got approved...
Here's a message for Thumper, who asked about Bozeman RE on a lower thread:
I'm not in and around the Bozeman market like I am the Billings market, but I'll let you know what I can. First of all, be very careful about which RE agent you go with. Anyone who claims the market there is "good" or even "ok" is either ignorant, or a liar-- to put it bluntly! And neither should be your agent. Even the RE-cheerleading newspaper is starting to acknowledge the trouble.. see here and here.
According to that first link, things are definitely "budging".. land prices 50% off asking! And still a 10-year supply, so there's more pain to come. Of course sellers are going to stick to their wishing prices as long as they can, but eventually they come to a point where it's either unload or get foreclosed on. For many people, that point is rapidly approaching, and this will drive the prices down.
If you've got the time, I'd say wait 3-4 years and take another look. You don't have to worry about missing the bottom. On the other hand, if you want to buy now and are comfortable with the risk of a big downside, get a good buyer's agent who will give it to you straight and allow you to drive the best bargain to minimize your losses.
Only the Realtors have access to the MLS. Make yours earn their commission by letting you know comp sales prices vs. original (and I mean the very first) asking prices. Find out how much prices are going off asking.
Be cautious, though, because my opinion is that Gallatin County RE will be a disaster in the next few years. Quite possibly a crash rivaled only by the Bitterroot and Flathead. As you state, the economics just haven't made sense.
Gallatin is a disaster, much like the Flathead. Lots of overbuilding there.
Check out Craigslist for all the desperate ads.