Thousands of workers chasing quick riches by flooding into the Bakken oil field have helped jump-start home sales in Billings.
And the wave is starting to make Billings houses harder to find — and more expensive.
Well-site geologist Joe Hallgren works under contract for SM Energy of Billings. He and his family live in Williston, N.D., the oil boom’s epicenter. But, they’re building a house in Billings and when it’s finished in July they’ll move here and Hallgren will commute to the oil patch.
“I’ve seen a few boom-bust cycles. This one is crazy,” he said. “We got to the point where, for our family, Billings is just going to be better for us.”
Last week, Bozeman resident Doug Pezoldt, who surveys land for local
engineering firm Sanderson Stewart, and his wife started moving into their custom-built Billings home.
“Really, in one year’s time, the boom in the Bakken has increased the volume of work and we just need more people in Billings to support that,” Pezoldt said. “My wife and I just feel like Billings is where we want to make our home long term.”
Having daily, subsidized flights to Sidney on Silver Airways hasn’t hurt. That means some oil field workers, many who work two weeks on with two weeks off, can live farther away and fly to work. More people like Hallgren are saying “yes” to the wages, while shunning the boomtown lifestyle.
“I’ve never seen anything like the awful traffic creating dirty towns even when oil was $140 a barrel back in 2007,” said Hallgren, who grew up in Williston and plans on renting out his two homes and a condo there.
Making a comeback
Stockman Bank Billings president Wayne Nelson said Realtors are busier than they’ve been in five years.
“Sixty percent of Montana’s top 10 builders are in Billings and 60 percent of the homes in Montana being built by April 30 were in Billings,” Nelson said. “We’ve got some traction going.”
At the current pace, Billings should see 300 new, single-family homes built this year, compared to 197 permits last year. But the city has a long way to go to return to the peak set in 2003 when 601 homes were built.
After four years in construction limbo, housing demand is activating new phases on existing subdivisions and kick-starting new ones.
When the Pezoldts and Hallgren searched for existing homes in Billings, they either couldn’t find what they wanted or lost the desirable ones to other buyers. So, they independently chose Steve Gountanis to build their new homes in the Vintage Estates subdivision at Grand Avenue and 53rd Street West.
Steve and his father, John Gountanis, built 47 homes in Arizona during the boom times when a house could appreciate $30,000 a month. But the conservative family refused invitations to build whole subdivisions, so their business didn’t fail when the housing bubble collapsed.
Unless a house was pre-sold, local bankers would only lend on entry-level homes during the recession, so that’s what builders built. But Steve Gountanis, who moved back to his hometown of Billings, had his own nest egg that allowed him to bypass the banks and continue to build $350,000 homes.
“When this market really took off three to four weeks ago, I was in a sweet spot. I sold three houses in one week,” he said.
Whisper Ridge, a 34-site development is under way just west of the Mormon temple on Rimrock Road. Dennis and Linda Buscher of Buscher Land Development & Quality Homes and Dave Hawkins, who owns Treasure State Electric, and his wife, Realtor Barbara Hawkins, are partners in Whisper Ridge which will have patio homes starting at $350,000 and houses starting at $400,000.
“It just seems the market has come back quite a bit in that price range,” said Dennis Buscher. “I think it’s because of the Bakken and because there hasn’t been anything built for so long.”
Nearby, River Rock Estates subdivision at 46th Street West and Rangeview Drive will eventually have 67 homes in the $400,000 to $700,000 range. Boyer Land LLC has lined up four local contractors — Dan Fleury Construction, Design Builders, Helgeson Homes and Image Builders to build out their subdivision.
And there’s an infill one-street subdivision off Rimrock Road at 32nd Street West where homes are filling up a keyhole-shaped development called Arrowhead Meadows. Eight of the 11 patio homes have sold, acccording to Classic Design Homes builder Mark Dawson, who is working with the developer Dan Wells at Regal Land Development.
“These are patio homes with their own fenced yard, but they still have the association to do the work,” Dawson said.
Trails West subdivision has sold about 36 homes since it started in November 2010 and the pace of construction at 58th Street West and Grand Avenue is increasing.
Nineteen homes are being built for the September Parade of Homes event, up sharply from seven homes last September.
Home prices go up
The average price for a single-family home in Billings has increased by $14,000 to $211,479 last month, compared to April 2011. Those figures by Realtor Howard Sumner exclude modular homes, so the price is higher than if modulars were included.
The median sales price rose to $189,900, up $10,000 from April 2011, according to Sumner.
Billings residential sales rose 9 percent for the same period, according to Trina White, president of the Billings Association of Realtors. And the time it takes to sell a home dropped in half to 5 ½ months.
Those changes mean housing inventory is lean now, especially in the $150,000 to $225,000 range.
“It’s kind of a Catch 22,” White said. “We didn’t have new construction for so many years, so people in existing homes need to sell and move up to the $300,000 to $400,000 homes and open up that inventory.”
Appraisals are taking three or four weeks, instead of two weeks, and rentals are scarce, too.
“Anytime we have hardly any rentals, we have hardly any housing inventory, too,” said Polly Kovash, a broker at Metro Realtors.
When the construction boom ended, the back-of-the-pickup builders left town and many local craftsmen moved on, too.
One trim carpenter who worked for years for McCall Homes quit for an oil patch job just as demand at the family’s Josephine Crossing subdivision tripled to six home sales a month.
“The tough part as a builder is you staff up for a consistent amount of houses, and then overnight you have to have more crews,” said Greg McCall, who was named Builder of the Year in 2011. “We’re really struggling to find the right people.”
A mild winter that allowed builders to keep working, an improving local economy and historically low interest rates are boosting home buyers’ confidence, according to local housing experts.
At the end of April, a homebuyer who qualified could pay as little as 3.88 percent interest on a 30-year fixed-rate mortgage and 3.12 percent on a 15-year loan.
That interest rate is amazing, said Myles Egan, who has been selling homes in Billings for 38 years, including at River Rock Estates.
“I think what’s going to happen with the shortage of new homes is the value of existing homes will see very good appreciation this year because people don’t have a lot of choices right now,” Egan said.
Despite all the positive signs on the Billings home front, this region remains tied to wider economies.
“Billings really is doing very well and the housing is showing it,” said Nelson at Stockman Bank, the largest real-estate lender in Yellowstone County. “But we can’t operate on all eight cylinders without the national economy getting back on its feet.”