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On the Rise: Condos and Townhomes

by Hart Real Estate Solutions

If you drive past any part of Bozeman, you’ll more than likely find some sort of new housing development under construction. What may be surprising for some though is how many of these new developments are actually condos and townhomes, as opposed to traditional single-family detached homes. With both mortgage rates and gas prices having risen recently, some buyers (especially younger, prospective buyers) may feel a bit uncertain about what they’re able to afford. Luckily, condos and townhouses may be more attainable than they think.

Nationally, new townhouses account for 12.3% of all single-family housing starts according to the National Association of Home Builders (NAHB). Over the past 5 years, the number of new construction condos and townhomes for sale in Bozeman has fluctuated quite a bit, with the most recent dip in activity having taken place in March of 2017. Since then, the number of condos and townhomes for sale has been on the rise. In Belgrade, there has also been some fluctuation during this same time period, with new condos and townhomes for sale having also been on the rise since March of 2017, though not nearly as rapidly as Bozeman.

 

Condos and Townhouses for Sale in Bozeman & Belgrade, Jan. 2013 - Present

            

This data was pulled from the Big Sky Country MLS for 2018. While we attempt to provide reliable, useful information, we cannot guarantee that the information is accurate, current or suitable for any particular purpose. Estimates are subject to change without notice.

Similarly, the median sales price for condos and townhomes has also risen in recent years. As of April 2018, the median sales price for both condos and townhomes was $289,900, while in Belgrade this median sales price was $267,400. (Disclaimer: either of these numbers could be skewed toward the higher end of the spectrum by a higher-end listing on the market.) While this may still seem high to many, the median sales price of a single-family home in April 2018 was $396,250, while in Belgrade this median sales price was $310,000. (Again, either of these numbers could be skewed toward the higher end of the spectrum by a higher-end listing on the market.)  Based on these stats, choosing to purchase a condo or townhouse in Bozeman (as opposed to a single-family home) could save you up to $106,350, while choosing to purchase a condo or townhouse in Belgrade (as opposed to a single-family home) could save you up to $42,600.

Number of Condo/Townhouse Sales 2014 - Present

Robert Dietz, Chief Economist for NAHB, states that “future gains in the share as townhouses are a useful bridge from rentership to homeownership for younger prospective buyers in high cost markets…”. This is good news for millennials, as they represented 34% of all homebuyers across other generations in 2017. With condo and townhouse construction on the rise, we can continue to expect an increase in closed sales for these types of homes as we move further along into 2018, and even into 2019.

 

More Housing Coming to Both Bozeman and Belgrade

by Hart Real Estate Solutions

Bozeman Development

The longtime trailer park on North Willson Avenue may soon be transformed into a series of duplexes. Santa Clarita-based company, William Homes LLC, has filed plans to replace the trailers with 16 three-story duplexes, each designed to include 3 bedrooms and an apartment above the garage for future owners to rent out if they choose— all contained within 1,800 square feet.

William Homes, LLC has a portfolio that encompasses many different types of projects, ranging from $159,000 to $1,000,000, which includes everything from townhomes to gated luxury communities.

Although the details about price range and the transition process haven’t yet been announced, construction could start as early as this summer if the city approves the project. 

 

 

Belgrade Development

Plans for a 595-lot subdivision were discussed on Monday with the Belgrade City Council. The future proposed location for this new development sits on 153-acres of the former Prescott Ranch on Belgrade’s west side.

Some board members expressed concerns over non-existent streets that are currently reflected in the plans. The board wants all streets to connect through the subdivision as they are concerned with traffic pileups and proper traffic distribution, both of which are current problems in Belgrade. Another point of concern amongst the board were park sizes— the current plan reflects 5 parks spread out across the subdivision, each averaging 3 acres in size. The board suggested reducing this to either one or two larger parks.

Additionally, developers want to change the zoning from R-2 to R-3 in order to boost density and allow for multi-family housing. All input gathered at Monday’s meeting will be taken into account before developers submit a formal proposal to the city.

How Rising Home Prices & Growing Wages Relate to Desirability in Montana

by Hart Real Estate Solutions

Montana housing market prices are high, especially in Bozeman. In 2016, the median sale price for a single-family home in Bozeman was $359,250. Fast forward one year— the median sale price in Bozeman in 2017 was $380,750 (a 5.98% increase from the previous year).      

This data was pulled from the Big Sky Country MLS for 2018. While we attempt to provide reliable, useful information, we cannot guarantee that the information is accurate, current or suitable for any particular purpose. Estimates are subject to change without notice.

 

In terms of median home values, Bozeman ranked the highest when compared to both other large cities in the state and the United States as a whole.

 

Median Home Values 

Although wages in Montana remain lower than the U.S. average, they are growing faster than other areas across the country. In 2000, the average weekly wage in Montana was 69% of the U.S. level— by 2016, they had grown to 76% of the U.S. level. Quickly growing wages could be a contributing factor to the ever-increasing demand for housing in Montana (and Bozeman in particular), although the demand for quality of life is likely the largest reason for the high demand and rapidly growing population. While the median household income in Bozeman is currently $68,000 (keeping pace with the current median home price), this statistic doesn’t account for the quality of the housing that is available at this price.

Many of the people coming to Bozeman are not reliant on Montana’s economy for income. This group of people includes out-of-state residents who own a second home in Montana, telecommuters, and retirees. In 2010, the share of second homes in Montana was 8%, while the U.S. percentage was only 3.5%. Our state also attracts a large number of people who have the financial means to live wherever they choose—23% of Montana’s personal income comes from non-wage sources such as dividends and retirement. The U.S. level is only 19%. In Gallatin County, more than 40% of adjusted gross income comes from non-wage sources.

Because of the high quality of life in Montana, rising housing costs are partially related to the state’s desirability to those whose income isn’t related to Montana’s economy, which means that wage increases may not be as tied to housing cost increases as we previously thought.

With Bozeman’s population expected to hit 50,000 by the 2020 census, wages growing relatively quickly, and home prices continually on the rise, when will our local market start to become more balanced? With new construction expected to rise as we move closer to that 50,000 mark and potential inventory growth predicted countrywide by the fall, we may be moving closer to both a more balanced market and more affordable housing than we think. 

Bozeman's Future- What Lies Ahead

by Hart Real Estate Solutions

Earlier this year, we learned that Bozeman had hired the city’s first affordable housing director in an effort to generate solutions to help reduce the gap between the cost of housing and affordability. In a recent city report, 22% of homeowners were found to be spending more than 35% of their income on their mortgage payment, while 44% of the city’s renters are spending more than 35% of their income on a monthly rent payment.

With current affordability statistics this high, Bozeman’s median single-family home price having reached $398,000 last year, and the current population estimated to be above 47,000 (and growing), it’s more important than ever for this new director to begin mandating affordable housing across all types of homes.

Another New Position

Another top priority for the city, in addition to working on the creation of more affordable housing options, is the construction of a new public safety complex. Whether the city will go alone to build the new center or partner with Gallatin County is to be determined, but either way, the plan will come with a big bill that will need plenty of support before citizens vote on it.

When it comes to large city plans that have an impact on Bozeman’s future (such as affordable housing options or the new safety complex), there’s a bit of a disconnect with city hall’s goals reaching residents. In effort to better communicate the city’s plans to citizens, Bozeman will be hiring its first communications coordinator.

This new role will serve as City Hall’s voice in order to manage which information goes to the public, and how. Largely intended to be an outreach position, the person who fills the job will keep citizens informed via social media and traditional press releases and will likely step outside of the traditional 8-to-5 schedule. Although the search to fill the position is national, the job could be filled as early as April if the city finds the right applicant.

Looking Forward

When Bozeman reaches 50,000 people (and so far, it’s on track to do so very soon), a Metropolitan Planning Organization (MPO) must be established, per the federal law. This organization will help with transportation planning and give citizens more control over what happens to the area. At this time, Bozeman will also receive federal money for future expansion projects. If the city and the county can work harmoniously together, some officials believe that an MPO would be beneficial as Bozeman continues to grow, while others are skeptical because of uncertainties with a limited pot of money and strained relationships between Bozeman and Gallatin County.

As the future unfolds and new city positions are created to help determine the direction in which Bozeman will develop, it will be interesting to see how some of the city’s current issues are solved in terms of both population growth and more affordable housing options.

More Affordable Housing Coming to Bozeman

by Hart Real Estate Solutions

Bozeman is growing exponentially— this is no surprise. What might be surprising though is how quickly it is predicted to grow by 2045. Between 2000 and 2016, Gallatin County added roughly 2,200 new residents each year. From 2017 to 2045, Gallatin County is expected to gain nearly 55,000 new residents, with 50% of these residents expected to live in the City of Bozeman.

It’s been a seller’s market in Bozeman for some time now, with both available inventory and housing affordability increasingly becoming more of an issue in our market. The greater Bozeman area has experienced an average 8.3% increase in median sales price over the last 5 years. Currently, the median home price in Bozeman is $398,000— meaning that a household needs to earn at least $68,400 per year, or $32/hour for one earner, in order for this home to be considered affordable at the 30% of income affordability standard. While the median household income in our area is $68,000 (indicating that home prices are in line with incomes), this statistic doesn’t account for the quality of the housing that is available at this price.

However, with the city’s prices on track to surpass wages, and so many people moving to the area over the next few decades, the need for more affordable housing options is critical. The latest affordable housing project is being led by HRDC, and will be constructed on a parcel of land that partially wraps around Baxter Square Park (just under 3 acres), a quarter mile northwest of the North 27th Ave and Baxter Lane intersection. The 24 townhomes will be available to families who earn between $30,000 and $40,000/year, and those who are interested must financially qualify and complete HRDC education and home buying courses.

The Location Dilemma

Years ago, previous developers created a human-made pond adjacent to the future location of the new affordable townhomes. Their project was stalled in 2008 after the recession and was never fully completed. Over the past decade Cattail Creek merged with the pond, creating an expanse of wetlands in the area, resulting in a difficult location to build on.

Originally, HRDC had plans for a few single homes— they’ve since asked city commissioners to approve constructing the new affordable units closer to the pond, in addition to reducing both the size of the lots and the amount of space between homes and the streets. HRDC also proposed the creation of dog stations, individual lot fencing, and enhanced building signs for each of the units. City commissioners approved the project on February 26th, as it falls in line with their preference for constructing more homes on less space as Bozeman continually adds several thousand new residents every year. 

Future Location for Affordable Townhomes (Approximate)

 

Next Steps

If Bozeman continues to grow as quickly as it is predicted to (an additional 27,500 residents by 2045), then projection estimates will demand 12,700 new housing units over the 2017 through 2045 time period. In order to construct all of these units, developers need between 1,800 and 3,100 acres— the current supply in city limits for residential development is 1,300 acres.

While some of these new 12,700 units will be single-family homes, others will be multi-family buildings, townhomes and duplexes. Some will be affordable housing opportunities, and others won’t be.  At any rate, Bozeman IS growing, and quickly. Whether growth means that we expand up, or expand out, expansion of some sort and the addition of more affordable housing options will be necessary over the next few decades as our city prepares for massive growth.

Why Baby Boomers and Millennials Are Competing for Housing

by Hart Real Estate Solutions

For years, many parents put their family homes up for sale once the kids grew up and moved out— this is known as the “empty nest” story, where many parents wanted to downsize as they grew older and neared retirement. This isn’t the case anymore— many Baby Boomers (born between 1946 and 1964) haven’t been able to find a smaller home that was cheaper than the large family home, so instead they’re opting to stay put and not sell. With so many Boomers choosing not to list their homes for sale, overall inventory has remained tight and prices have stayed high.

Why is this?

In a recent survey conducted by Realtor.com, 85% of Baby Boomers said they were not planning on selling their homes in the next year. When asked why, 72% said that their current home met their family’s needs, 13% said financial concerns prevented them from selling, and 12% said they needed to make home improvements before selling. Baby Boomers hold a very high stake in the housing market, as they currently make up 78% of ALL homeowners, while Millennials only make up 41%.

As Baby Boomers decide to stay put, this removes about 33 million properties from the housing market. Many of these homes are suburban single-family homes or urban condos— the same types of homes that Millennials are looking to buy. However, many of these older homes do not have the same modern, open-floor plan that both Millennials and Baby Boomers alike are attracted to, making it difficult for Baby Boomers to sell their homes. Both generations are competing for the same types of homes (1,800-1,950 sq. ft.), even though they have different lifestyles.

Many low-end homes that Millennials would consider purchasing in a more balanced market are being rented rather than being available for sale, due to competition being so high. The idea of purchasing a starter home and reselling it several years down the right road when they’re ready to settle down and start a family is no longer a viable option for them, due to lack of inventory and affordability in today’s market. As a result, many Millennials are now skipping traditional starter homes, and choosing to buy something larger right off the bat.

The Future

Many analysts believe that more housing in the future should be built to cater to the desires of Millennials (greener materials, less square footage, etc.) rather than the older generations. Others believe that Baby Boomers will eventually sell their homes as they hope to get a better price later rather than settling for a lower price now. If and when “the great senior sell-off” happens, it isn’t likely until the mid-to-late 2020s, as the oldest millennials approach their mid-40s and are more interested in the larger homes that the preceding generation is ready to let go of.

A New Solution: Bozeman’s First Affordable Housing Director

by Hart Real Estate Solutions

Bozeman’s Affordable Housing Action Plan pinpointed several major strategies to implement over a 5-year timespan (2012-2016). Its purpose was to work on providing more affordable housing units and down payment assistance for both renters and homeowners alike. While this plan outlined several goals that were partially met by the end of 2016, affordable housing in Bozeman is still a significant issue that needs continued attention and work in the future.

In 2010, 28% of homeowners and 49% of renters in Bozeman were living in unaffordable housing, when using the widely accepted benchmark amount of <33% of total income for homeowners and <30% of total income for renters. It’s important to note, however, that there is no universal home price or rent benchmark that defines “affordable”— this varies by income level and should be based on ability to pay.

 By 2015, at least 4,000 of the city’s 8,400 renters were paying rents at or above the 30% threshold, while a third of homeowners were paying at least that much, if not more.

Is Something Being Done to Help?

With these statistics not having improved much in recent years, the City of Bozeman has decided to hire its first affordable housing director. The person who will fill this new position (expected to begin by the end of January) will be responsible for generating solutions to help reduce the gap between the cost of housing and how much many Bozeman residents can afford to pay.

Six months ago, Bozeman planning adopted a new rule that mandated that builders and developers would have to either sell 3 in 10 homes in new developments at $260,000 or less, OR 1 in 10 homes at $215,000 or less, subject to change based number of bedrooms per unit. The city has been trying to keep up with this rule, which is where the need for an affordable housing director stems from.

Additionally, the new director will help to track housing projects from the time a building permit is issued to the time that someone closes on their home, in order to ensure that this 6-month-old rule is followed from start to end.

As 2018 unfolds, it will be interesting to see how this new position begins to change the affordable housing market and what impacts it will have on many of Bozeman’s renters and homeowners who are currently above the income threshold for housing. 

Affordable Housing Development for Livingston in the Works

by Hart Real Estate Solutions

With 13.2% of Livingston’s total population (last estimated in 2016 at 7,401) in poverty, the addition of an affordable housing development would greatly benefit citizens who are currently working and earning lower wages.

How is This Problem Being Addressed?

Over the next 10 years, the Montana Board of Housing has assigned $27 million in credits to help fund affordable housing projects not only in Livingston, but in Billings, Butte, Kalispell and Lewistown as well. Homeword, Inc., a Missoula-based, non-profit affordable housing developer, has been awarded $5.8 million in tax credits to transform the old Livingston Memorial Hospital building into 34 studio, one- and two-bedroom apartments.

The new apartment complex, Bluebunch Flats, is named after Montana’s official state grass, Bluebunch Wheatgrass. In keeping with Homeword’s mission of sustainability, hospital rooms in the existing Memorial Hospital building will be renovated and converted into individual apartments.

Units will available to residents who make between 40% and 60% of the area median income. As of last year, median household income for Livingston was $40,358, while per capital income was just shy of $27,000. Although rent prices are not yet set in stone, they will likely range from $425 for a studio to $800 for a two-bedroom. Construction is set to begin in the summer of 2018, with a projected completion date of mid-2019.

Other Affordable Housing Projects Around Montana:

  • Billings: Heights Senior Apartments— 38-unit project for senior citizens
  • Butte: Copper Ridge Apartments— 32-unit project for families
  • Kalispell: Courtyard Apartments— 32-unit acquisition rehabilitation project for families
  • Lewistown: Meadows Senior Apartments— 35-unit acquisition rehabilitation project for senior citizens

Related Articles: 

Housing Market Trends Amongst Generation Y

Home Prices and Growth: What's Going On?

Belgrade Expands and Prepares for Future Growth

Housing Market Trends Amongst Generation Y

by Hart Real Estate Solutions

Inventory of homes for sale is tight and as a result, months of supply is low. With so many homes not remaining on the market for long, sellers have the advantage over buyers in that they have a much higher chance of obtaining top dollar for their home.  While this information isn’t new, you may be surprised to learn that generational trends play a huge role in today’s housing market, particularly amongst the buyer population. 

Who’s Buying the Most?

Different generations have different home buying tendencies and patterns. In 2016, Millennials/Generation Y (ages 36 and younger) represented 35% of all homebuyers across all other generations. This year, that number is down to 34%— still the largest share of home buyers. Of these buyers, 66% were also first-time home buyers. Generation X (ages 37-51) represented 28%, Younger Baby Boomers (ages 52-61) represented 16%, Older Baby Boomers (ages 62-70) represented 14%, and the Silent Generation (71-91) represented 8%.

 

Of all Gen Y buyers, 46% had a median student loan balance of $25,000, and 23% agreed that saving for a down payment was the most difficult step in the home buying process. It makes sense that this loan balance would decrease over time as the buyer ages, due to increases in income— however, 27% of buyers between the ages of 37 and 51 had the highest median loan balance of $30,000. This is likely due to accumulation of their children’s college loans on top of their own remaining balances.

Why Is Gen Y Dominating the Buyer’s Market?

Despite low inventory, rising house prices, and student loan debt, why does Gen Y represent the largest share of home buyers? For starters, rent prices are on the rise too— when taking into consideration that monthly rent payments can increase over time and mortgage payments are fixed, many Gen Yers are leaning towards home ownership. Many are also choosing a mortgage over renting because of their dogs— 33% of Gen Y home buyers stated their primary reason for purchasing a home was to have a yard and plenty of room for their dog, while 25% stated it was because of marriage and 19% stated that it was the birth of a child. Simply put, the desire to own a home of their own, the desire for a larger home, and a change in their family situation were the top 3 reasons amongst all Gen Yers for purchasing a home.

Looking Towards 2018

Although student debt and rising house prices may present a challenge for some, many Gen Yers are putting these factors aside and continuing to contribute to the housing market in a pretty significant way. As the days remaining before 2018 starts are limited, here’s what the Professional Warranty Service Corporation predicts for generational home trends for the new year: Gen Yers will represent 45% of all home loans while Baby Boomers represent 30%, and overall home sales will increase by 8%, or about 670,000 units. So far, it looks like Gen Y is on track to dominate the market for another year! 


Related Articles: 

Home Prices and Growth: What's Going On?

Survey Finds Seceding Buyer Confidence in the Real Estate Market

Red Flags in the Real Estate Market

 

Home Prices and Growth: What’s Going On?

by Hart Real Estate Solutions

What Does Growth Look Like Around the U.S.?

It comes as no surprise to many of us that owning a home can be an expensive venture. Factor in HOA fees, interior appliances/materials, miscellaneous maintenance costs and everything in between, and it’s easy to see why being a homeowner can appear to be daunting to some.

Although home prices grew 5.6% last year, this is only determined when comparing dollars to dollars. If this statistic is adjusted for inflation, this increase is still actually 15% below the high that occurred in 2006. Of the country’s 100 largest metro areas, only 41 grew to new peaks, even though 97 of these 100 metro areas did see overall home price growth. Overall, housing markets on both the West and East coasts have experienced inflation-adjusted home price increases of more than 40% in the last 16 years, while markets in the Midwest and South have generally experienced decreases.

However, growth has not been the same across all income levels. After Harvard researchers collected data for more than 9,000 ZIP codes across the country, most home prices in all income brackets were LOWER than their pre-2006 peaks. Here’s the breakdown:

  • Low-income areas: 13.7% lower
  • Moderate-income areas: 6.5% lower
  • High-income areas: 3.3% lower

Because of the post-recession change in home prices, many homeowners were able to emerge from underwater, a term indicating that the value of a home is below or under its mortgage amount. In 2011, the number of underwater homeowners topped out at 12.1 million; by the end of 2016, that number was down to 3.2 million.

                   

Source: PalmBeachPost.com

What About Growth in and Around Bozeman?

Bozeman remains one of the fastest growing small towns in the country, with a population growth rate of 4.6%. Home prices across the state currently exceed pre-2006 levels by 10%.

When comparing median sales prices between Bozeman, Belgrade and other Bozeman areas, home prices are still steadily on the rise in all 3 areas.

 

Median Sales Prices (2011-2017)

This data was pulled Big Sky Country MLS for 2017. While we attempt to provide reliable, useful information, we cannot guarantee that the information is accurate, current or suitable for any particular purpose. Estimates are subject to change without notice.

 

Although median sales prices are continually rising, the good news is that the median sale price is often lower than the median original asking price: 

This data was pulled Big Sky Country MLS for 2017. While we attempt to provide reliable, useful information, we cannot guarantee that the information is accurate, current or suitable for any particular purpose. Estimates are subject to change without notice.

 

As for the country as a whole, Freddie Mac predicts an overall home price increase of 4.9% in 2018. While that may seem like quite a jump, this prediction is still lower than the 6.3% growth we’ve seen so far this year.  Much like the prediction for 2017, 2018’s prediction also suggests continued economic growth of around 2%, steady job gains and relatively low mortgage rates. 


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Gallatin County Leads Montana's Economy

Red Flags in the Real Estate Market

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