Real Estate Information Archive


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Creative Ideas Address Home Affordability In Montana

by Tim Hart

I read a great article in the Bozeman Daily Chronicle about how Whitehall, Montana has attacked their affordable housing situation and how Bozeman might be able to use some of these strategies locally. Whitehall is a small town about an hour away from Bozeman and a little outside of Butte. Whitehall has worked hard on creating a new affordable subdivision in town with homes that can be built for under $120,000.

These homes will be built in the new Mountain Horizon Subdivision in Whitehall. Habitat for Humanity is helping to develop the new subdivision. They along with builders and city officials have done an excellent job coordinating their efforts to keep home costs low.

According to the Bozeman Daily Chronicle, the subdivision is using a home design that is 938 sq. ft with 2 bedrooms, but is under $120,000 to build. From the most recent quote by Bozeman based builders, its not possible to build a 1,200 square foot home in the city for less than 186K—and that number is before builder profit and real estate fees are added in.

Of course, comparing Whitehall to Bozeman is not necessarily an apples to apples conversation. Perhaps the biggest contributor to home affordability is the affordability of the lots below them. In Whitehall, it costs on average $25,000 for a finished, infrastructure equipped lot whereas Bozeman sees the average cost of a lot around $70,000. Bozeman has looked into trimming down on lot sizes to make their costs more effective.

However, there are some cool strategies being employed that might help lower costs in Bozeman, though certainly not to 120k per home. The first strategy used by developers in Whitehall required cooperation from Whitehall city officials. The subdivision was built outside of city limits because the land was far cheaper. However, once the land was purchased, it was incorporated into the city. That helped the developer’s buy cheap but still get access to the benefits of incorporation. For specific subdivisions on the outskirts of Bozeman, this could be a good solution to lower costs.

Second, the builders are using cheaper insulated materials to build their homes over traditional wood-framed construction. By using structurally insulated panels usually built from Styrofoam and placed between sheets of plywood, builders can lower their outgoing costs. Additionally, the insulation will help lower the future homebuyer’s utility costs, helping them save money after purchase.

Finally, the developer is also offering homebuyers the opportunity to work on their own home, with their labor removed from the costs.

All of these factors will help lower the overall costs of these homes. Bozeman can take a look at these strategies and decide whether to apply any of them moving forward. As Bozeman looks to address home affordability, creative ideas like these will help everyone involved keep home values at reasonable levels.



Source: Dietrich, Eric. “Whitehall Could Guide Bozeman Housing.” Bozeman Daily Chronicle. Sept. 3 2015.

Mortgage Rates Still Below 4%

by Tim Hart

After a volatile July, loan interest rates have stayed below 4% for the 5th consecutive week. This week, the 30-year fixed-rate mortgage averaged 3.93%, just a tick below last week’s 3.94% average. Movement has been relatively small over this time period, but buyers will want to stay in the loop should rates trend upwards again.

Housing markets across the US have responded well to the low rates as home buyers have tried to lock down favorable rates while many homeowners have tried to refinance. All year, lenders have tried to keep rates low to keep attracting prospective buyers but they have been steadily creeping from the low 3’s to high 3’s(see January, March and April numbers here).

Fifteen-year mortgage rates averaged 3.15% this week—down from 3.17% last week.



Mid and Low Tier Rentals Scarce as Prices Grow

by Tim Hart

Mid-tier and low-tier apartments for rent have grown more and more scarce as developers continue to build a higher percentage of luxury rental apartments across the United States.

Despite the multi-family construction rate maintaining its high levels, most of these homes, 80% in fact, have been built in the luxury sector, while mid and low tier apartments have become increasingly scarce.

Based on construction costs for apartments across the United States, any developer would prefer to build luxury rentals, particularly over mid-tier rentals. According to, one company, AvalonBay Communities, on average spends $340,000 per unit, requiring a monthly rent of $2,900 to make up for the costs and have the venture be profitable. After the unit is built, adding luxury style amenities such as stainless steel appliances and granite counter tops are very cheap, yet these upgrades can bring in far higher rent if the unit is listed as luxury.

In lieu of luxury apartment construction, mid-tier and low-tier rentals have not been built, keeping competition and prices very high. Supply of low-tier apartments fell by 1.8% since 2008 while luxury apartment inventory has increased by more than 30% in that time frame. Historically, builders were able to create low-rise apartments in suburban areas to lower their own costs. However, government officials across the US have pushed more and more for mid-rise to high-rise buildings, which helps avoid sprawl, but also leads to high costs and therefore luxury building. Whether builders will eventually revert back to low and mid-tier apartments is yet to be seen.

Rising rental costs have not alleviated this issue. Although rent rose for types A B and C apartments, mid-tier saw the highest growth rate. Class B renters saw their rent jump 5.8% in the second quarter of 2015. Rising rent costs have also pushed many mid-tier apartments closer to the luxury market, leaving mid to low middle class scrambling to find affordable housing.

Rent has risen consistently over the past few years. Increasing inventory and improving first time homebuyer confidence will help alleviate these costs. Ideally, more renters will look to buy a home in the following years, deepening the for sale housing market, while lowering competition in the rental market.




New Apartments Add Inventory to Bozeman Rental Market

by Tim Hart

Developers and city officials broke ground last week on a new, awaited apartment complex designed to help add more rental inventory to the Bozeman market. The complex will now bring 48 new rental units to the Bozeman area to the previously planned 47.

The project has been sponsored by the Montana Board of Housing to give low-income residents a chance to rent the new units alongside those who can already compete at full market value.  The MBH will give tax credits to the developers so they can in turn offer a few units to select families at up to 50% below market rent. The City of Bozeman continues to strive to have Bozeman be affordable to all residents and affordable housing projects like this, help keep people from being ‘priced out’ of their living arrangements.

In addition to increasing the number of subsidized, affordable units in Bozeman, the new apartment complex will add general apartment inventory. Having additional units in Bozeman will help increase rent competition, potentially lowering costs for tenants. Much like last year, Bozeman’s vacancy rate is essentially at 0 percent, which has lead to the sharp rise in rental costs around town. The overall population growth of Bozeman, as well as the growth of Montana State University, have both put a lot of stress of the remaining rental home inventory in the area.

Bozeman has approved both residential and commercial projects, whether full subdivisions or multi-family style living, all in an effort to increase the inventory and amenity spread of Bozeman. Bozeman continues to work hard to stay up with current growth and is still focused on keeping housing affordable in the area.




FHA Loan Activity, Interest Rates Up

by Tim Hart

FHA loan activity rose to a two year high in the second quarter this year. FHA loans typically have very low down payments, designed for first time homebuyers looking to get into home ownership but may not have the capital to do so. Having FHA loan activity rise implies that these buyers are now feeling financially stable enough in a growing economy to take the plunge—great news for housing and the overall United States economy.

Buyers using FHA loans made up 23% of all home and condo sales that were financed. That figure is up 19% from FHA activity in 2014 and is the highest share of the market since the first quarter of 2013. In general, a strengthening economy and job market probably most effected the increase in activity. At the beginning of the year, the FHA lowered their mortgage insurance rates, which may have also helped provided more benefits and more activity. Mortgage activity across the board has been rising. Having high mortgage activity will help deepen and strengthen the overall housing market.

In similar news, mortgage rates did inch a few ticks higher this week. Mortgage rates went up for the first time in 4 weeks, but still remain very low. The 30 year fixed rate averaged 3.94%, up from 3.91% last week and below the 4.04% seen in July. Rates are expected to go up when the Fed raises their own interest rates, but when that will occur is yet to be seen.





US Home Prices Reach All-Time High, Inventory Low

by Tim Hart

Home Prices in the United States have reached an all time high according to the National Association of Realtors. The median sale price in June for all real estate housing types reached $236,400, up 6.5% from June 2014. Not only that, that figure hit above the 2006 record of $230,400 and is an all time high.

Limited inventory and high demand have been leading to the higher prices. Home sales increased by 3.2% in June to the highest level of sale activity seen since February 2007. Steady job growth and an improving economy have been pegged as the leading cause for the high activity.

Coupled with high buyer demand, home inventory in the United States remains low. Housing inventories only saw a 0.9% increase in June, to a total of 2.3 million homes on the market. Inventory is 0.4% higher than a year ago but still remains at a 5-month supply. The supply represents how many months it would take to sell all the homes currently on the market. (Economists want to see a 6 month supply in an ideal market.)

Because of the high demand and low inventory, homes are moving extremely quickly. In June, 47% of homes stayed on the market for shorter than a month.

So long as demand stays high and home inventory continues to be low, we should continue to see rising home values.





Bozeman School Board to Set Budget

by Tim Hart

Tonight, the Bozeman School Board will vote on whether to raise local property taxes to approve the $72 million in spending budgeted for this school year in Bozeman. Approving $72 million in spending would be up 3.4% from last year.

Enrollment for the Bozeman School District is expected to increase by 170 students, or 2.7 percent. The expected total will be 6,464 students—a new record for Bozeman school enrollment numbers. The new budget would add 10 new elementary teachers and 1 high school teacher to better address the growing student population. The school board will also increase their reserves to better tackle the proposed Sacajawea Middle School expansion and second High School. The district’s upgrade of Hawthorne Elementary, will use a TIF, and not raise taxes on those in the district.

In order to pay for the spending increases, 31 million will need to be raised from taxpayers. The process has been complicated because of the Department of Revenue’s property tax reappraisal. Property values only dropped by 3% from when the recession began in 2008—far better than the expected 11% drop that some predicted—but balancing the budget has been more difficult with shifting property values. If the budget is approved, each property owner in the Elementary district will see their taxes raise by 7.45 mills and those in the High School district will see their taxes raise by 3.79 mills.

A tax increase approved by voters as well as the Montana’s Legislature’s increased state spending on schools have also contributed to the budget. The total elementary budget would go up to $45.4 million and the high school budget would go up $26.8 million. The district has been awarded a plethora of awards in the last year, whether financial, academic, student based, or from an outside ranking system.




Rental Market Hit New Highs in June

by Tim Hart

Rental prices continue to grow in the United States Housing Market making many wonder when and where the tipping point may come. The national effective growth rate for rental values went up by 5.1% in June to a 47 month high. Effective rent growths have also been at 5% for 5 consecutive months, a streak not seen since April 2009.

Tight occupancy has pushed rent even higher as the intense competition has allowed landlords to consistently raise rates while still finding tenants. The US rental occupancy rate now sits at 95.3 percent. Although renters have struggled to keep up with the recent price growth, they’ve still made the payments work—but for how long renters can afford these high rates is to be seen.

The US Housing market may be catching up from the housing recession, when a very small number of apartments were made. Now, renters can only hope the recent economic growth will help builders increase home inventory and drive landlord competition to lower prices. Even despite low mortgage rates, the rising home values have kept many renters away from buying a home. Oddly, buying has been cheaper than renting in 66% of the national housing market, yet renters continue to pay steep prices for a place to stay.

In Bozeman, the local real estate market has acted as a sort of microchasm for trends seen in the US housing market. Bozeman continues to try to add additional inventory to keep rent prices low and have also looked into lowering lot sizes to increase the number homes they can build on a space of land.




Gallatin County Market Update - August 2015

by Tim Hart

This month, we will compare single-family residence sales in all of Gallatin County for 2013, 2014 and 2015 through the second quarter. Here are a few stats for Gallatin County single-family residences:

  • Total Quarter 1 and 2 sales increased by 9.39% from 2013 to 2014 (554 sold in 2013, 606 sold in 2014)
  • Total Quarter 1 and 2 sales increased by 10.09% from 2014 to 2015 (606 sold in 2014, 667 sold in 2015)
  • Quarter 1 and 2 dollar volume increased by 23.12% from 2013 to 2014 ($198,018,584 in 2013, 243,809,312 in 2014)
  • Quarter 1 and 2 dollar volume increased by 18.74% from 2014 to 2015 (243,809,312 in 2014, 289,510,813 in 2015)
  • Homes stayed on the market 37.62% shorter in 2014 than in 2013 (155.5 days on the market in 2013, 97.5 days on the market in 2014)
  • Homes have been staying on the market 1.54% longer in 2015 (99 days on the market in 2015, 97.5 days on market in 2014)

Summary – Through Quarter 2, numbers suggest the Gallatin County Housing Market is growing and healthy. I want to note that Quarter 2 dollar volume in 2015 ($186,513,135) came very close to the 2013 Quarter 1 and 2 combined volumes ($198,018,584). More homes are being sold at higher prices across the valley. The overall Gallatin County market is very healthy.

Land off Stucky Road Considered for Annexation

by Tim Hart

Bozeman City Commissioners will vote next Monday on whether to annex a piece of land off Stucky Road in order to zone it for apartment style residences. The commission has seen several bids to annex additional land into the city in the last year. Bozeman continues to find ways to add additional home inventory to keep home values reasonable.

The land off Stucky is currently set for agricultural use and nearby farms are concerned about adding more residential lots on high quality, useable soil. Both farmers and developers made their pleas to the City Zoning Commission and though the zoning commission voted 2-1 against rezoning the parcel, the decision ultimately rests with City Commisioners.

Bozeman continues to search for land and strategies to help keep the real estate in the Gallatin Valley affordable. The city has looked at narrowing lots and has given a high number of building permits to increase inventory. Bozeman will need to strike a healthy balance between keeping prices reasonable and growing in a healthy, planned out manner.




Displaying blog entries 1-10 of 151