For All You Doubting Thomases..
Billings Housing Market Blog reader and commenter Anon#1 passes along a link to this Big Sky Business Journal article and this comment:
I feel special- I'm the doubting Thomas named in the below article. :-) I should have been more specific about which claim I wanted her to ask about, but them's the breaks. Also, Howard's stock market quote conveniently ignores dividends- the stock market since '68 handily beats the return on a house in Billings, even with the recent -50% crash.
It's an interesting article by Evelyn Pyburn that has Howard Sumner responding to all the "Doubting Thomases" out there wondering about the faltering market. The crux is that Sumner returns to his "steady, long-term returns" argument. With the last few flat years of Billings house prices, his adjusted long-term appreciation rate is 5.72% over 41 years.
41 years of returns is very nice, of course, but how many people stay in a house 41 years? How many people have a steady 41 year career with no income disruptions and no moving required? It's just like near-retirees who've seen their stock values drop 50% this past year. You can tell them how the stock market returns 8% over long periods of time, but that's no comfort today in their present situation.
Long-term numbers are interesting, but there are more pressing questions today's potential buyers want to know: If I buy a house today, will it be worth less in 5 years? Can I wait a few years and get a much better bargain? What's it like to be underwater on your house, then get laid off?
From the article, Sumner says: "Well I went back and refigured for mister doubting Thomas.." What I want to know is, how does he know the Doubting Thomas is a "Mister"?
Although I am a "mister".
I realized after I left that comment that Howard made another mistake in computing the Billings housing market return- he compared a 1968 house to a 2009 house. Houses back then were about 30% smaller then they are now. My back of the envelope calc says Billings housing has actually only returned about 4.8%.
I wrote an email to Evelyn about the problems in Howard's argument and she wrote me back a very nice note. She invited me to send in a letter to the Editor about my objections, which I think I will. Watch for it. :-)
Coldwell put out a market update for March, spinning hard to make an argument that the $75,000-$225,000 "entry market" is a seller's market, even though they say there's now 8.4 months of inventory in that price bracket vs 5.5 months of supply last year. Even with the $8,000 buyer's credit, which only helps first-time buyers and so should mostly aid this lower category, inventory still increased in March.
What I really thought was interesting though was the stats on the higher priced stuff, 11.6 months of inventory in the $225k-$400k and 39 months (!) of inventory in 400k+.
Oh yes, they say "Billings is creating jobs" even though the unemployment rate has done nothing but go up in Yellowstone county, although it is still pretty low.
I'd bet that the "entry level" stays relatively strong compared to the rest of the market thanks to the $8,000 credit but will cool off from March since there were no doubt people rushing to buy so that they could get the refund this year instead of next. Even relative strength isn't going to mean a great market, not with 8.4 months of inventory and climbing.
Will be interesting to see Howard's more detailed stats.
http://realtytimes.com/rtmcrcond5/Montana~Billings~thebrokers