For the first half of 2019, the real estate market in Billings is looking strong, with local organizations noting a few aspects of the industry to keep an eye on.
Interest rates are lower than this time last year, and the number of home transactions compared to last year are up.
According to Shelly Harris, president of the Billings Association of Realtors, interest rates for mortgage loans are in the lower 3% range. It’s a nationwide trend that Billings is seeing as well.
“They’re a good half percent lower than this time last year,” she said. “The lower that interest rate is, you can borrow more money, because you’re paying less interest.”
She said the lower interest rates usually depend on many different factors. A volatile stock market is one reason, while others believe that the rate is what the market can bare at the moment.
Bruce McGee, real estate agent with RE/MAX Billings, believes that home buyers right now are unwilling to buy houses at higher interest rates.
“For every point of interest that goes up, the buyers of the house lose a big portion of their purchasing, which is important for real estate agents and lenders,” McGee said. “So every time some interest goes up, and people can buy less, it’s painful for the rest of us.”
For someone who is buying a $200,000 house and applies for a mortgage with an interest rate that increases by a quarter of a point, it will cost the buyer about $5,600 more to borrow that money. If the interest rate goes up a full point, it’ll cost the buyer about $21,900 more.
“They’re not going to sign on for high-interest loans to buy houses like people did,” McGee said. “The only thing that would force that to happen is for people who absolutely could not find their housing any other way. I don’t see interest rates going back to credit card numbers like they were back in the ’80s.
“What I see is they’re deriving as much from interest rates that people are willing to pay in order to have a house to live in," he said.
According to data from RE/MAX, July had about 297 houses close, a 2.9% decrease over June and a 6.1% increase over July of last year. About 926 houses are actively in the market, a decrease of 3.9% from June and a decrease of 13.1% compared to last year.
The average days a house sits on the market was 52 days in July, which was down 11.9% in June but up 6.1% compared to July of last year.
The median sale price for a home is at $260,000, an increase of about 2% from June and up about 6.1% from last year.
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In Billings, house sales pick up in the spring and drop off when the fall season starts, McGee said.
Once October comes around and the holidays draw near, people are less likely to buy, looking instead toward spending on the holidays. Home sales tend to pick up again in January and February.
Another national trend that Billings is following is the lack of inventory available to home buyers.
Data shows that there is about a 2.5 months' supply of inventory in Billings, which decreased 23.5% from June and decreased 33.3% from July 2018. Inventory always replenishes, but the national issue with supply and demand is felt in Billings.
“If we had more than enough listings for people to buy, the prices would be such that people would have more affordability,” McGee said. “But what happens is, we have a limited amount of listings, high demand on properties, increased property values, and wages are not keeping up with property values.”
Kim Welzenbach, executive officer of the Home Builders Association of Billings, believes that rising building costs and a lack of workforce for the labor industry are driving down supply.
There’s a rising trend in consumers purchasing multi-family units in Billings. Single-family homes are popular outside city limits, and more families are remodeling their homes rather than moving into new ones.
From January to August 2019, 300 building permits have been issued for single-family, multi-family, commercial buildings and other types of construction. For the same time period in 2018, 382 were issued.
“I’ve always been happy to say that most of the time what’s happening nationally doesn’t really impact us, but with regard to workforce it does,” Welzenbach said.
Billings has seen a lot of development on the West End and, in recent years, more activity in the eastern area of Billings’ Heights. More people are having companies custom build homes, rather than searching for homes that are already built.
These homes that are already built, also known as spec homes, can start at over $300,000, and builders aren't willing to build them.
Welzenbach said that the shortage has been an issue for a few years.
“The buyers are there, but the biggest challenge is the workforce trying to keep up with it,” she said. “We’re not building as fast as we once used to, but the demand is there and the supply isn’t.”