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

You may have noticed headlines lately about some major trouble in the subprime lending markets.  Despite reassurances that this trouble is "limited to subprime", I believe that this may be the beginning of the end of this massive credit bubble.  Look for more troubles in the Alt-A and Prime lending markets as the year goes on.  As standards tighten, sales will likely fall and speed up this nationwide downturn.

State Representaive Bob Lake wrote an opinion piece last year about how Fannie and Freddie should not be prevented from continuing "innovative" financing since housing is becoming unaffordable.  At the bottom of the piece it is disclosed that Rep. Lake is also a real estate agent.

The following comment from an anonymous reader was at the bottom of the article for awhile.  I will reprint it here because it perfectly describes the problem with our lending situation:

Rep. Lake, I beg to differ re. your premise that the more readily available loans have made housing "affordable" to us who are not millionaires. I propose that the easy lending practices have made housing LESS affordable for just about every American. Please do some research regarding suicide loans and how they have fueled the current housing bubble. Americans do not need easy loans to get a house. What they need are home prices that are in line with incomes. I feel the Fannie/Freddie fiasco has only served to price most Americans out of the market. It's true that many have "purchased" in the past few years, with the "help" of easy loans and low interest rates. I believe that in the next few months, we will see increased foreclosures as Americans find that the house they were told they could afford by their friendly lending institution becomes beyond their reach to pay for in reality. Lesson learned. As a lower income person, I think the best way to make housing "affordable" for future generations is to get rid of Fannie May and go back to 20% down, 15 or 30 year fixed. Get sanity back into American society and economy. We'll all be stronger for it. Thank you, A (very) concerned American