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?

If you lived through the housing bust of the 80's and happened to pick up a Billings Gazette during the aftermath, you might have seen this graphic:



Pretty steep drop, huh? The population declines and price drops of the mid 80's created an environment where building almost ground to a halt for a few years. On a graph, it looks pretty ugly. But wait. Let's plot the current decline in construction against the 80's bust in terms of percent decline from peak:



Note that the 2009 figure is a rough projection based on the first two months of the year. If construction picks up, this graph will look a lot better. But if not, well, things sure are looking like the 80's or even worse, construction wise.

The construction bust really makes you ask questions, in the face of all the rosy predictions and reassuring Realtors: If the housing market is so healthy, and Billings is not overbuilt, and prices are stable... then why is no one building?