Distinctly Montana Magazine

Housing 2014 Top 5 Influences on Our Montana Recovery By Robyn Erlenbush W hat will 2014 bring for real estate in the "406" area code: good news for sellers, mixed reviews for buyers and a robust selling season for the Big Sky State. Every market has finally moved into "recovery" mode and most are experiencing record-breaking numbers. Cash buyers and investors, many of whom are out-of-state and out-of-county, are recognizing the value proposition of Montana real estate. Local primary home sales are flourishing with first-time and move-up buyers confidently "moving-in" on real estate. As we enter the new year, I thought it might be beneficial to examine some key influences and how they will impact us locally. 1. What does today's real estate deal look like across Montana? We have clearly moved from an "era of distressed transactions" where the Buyer exerted negotiation dominance to the current pendulum swing of the "new normal" which is Shadow Inventory much more Seller-centric. Shadow Inventories (mortgages that are 90+ days late or in the foreclosure process) peaked in the third quarter of 2009 nationally and continue to decline dramatically. All major markets in our state report a very low rate (less than 5%) of sales that are bank-owned or short sales, which means that today's real deal is between a typical seller and buyer, with tangible life emotions, motivations, and market-driven prices. 1 2. Do we have a healthy supply of housing and how does Montana stack up? It is astounding how quickly conditions can move from an over-supply to a shortage. Historically, a balanced quantity of housing is a six-month supply. Existing home inventories in the U.S. are bounc- 74 ing at a 13-year low, with new home inventory at a 50-year low. Montana is following that trend. Led by the major markets of Billings, Bozeman, and Missoula, housing supplies have declined to record lows. Supply helps us understand how quickly a market home inventory is moving, and in Montana we are traveling at a very brisk pace, with only a three-four month supply available at and below the median price point. Across the state, the "sweet spot" differs from a high of $350,000 in Bozeman to $200,000 in some markets. The properties "for sale" at or below this price, sell within 30 days at or near full price and many times sell above asking price with multiple offers. This recovery is like a "controlled burn" fire. Only certain price points of the market are affected. Others such as the higher-end, second home, recreational, and mid-size land tracts 5-40 acres are improving, but not at the same velocity. Larger acreages and development tracts are also in high demand and sell readily. 2 3 falling affordability 3. How does the "Affordability Index" affect and influence the Montana Buyer? So many factors impact a buyer's ability to purchase. Of most significance are housing prices, interest rates, and household income distinctly montana • winter 2014

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