Bozeman Montana Real Estate Information Archive

Distressed property sales have decreased significantly since 2011. Distressed homes like foreclosures and short sales create market volatility while putting homeowners into financial hardship. Distressed property sales often leave big winners and big losers, doing little to strengthen or deepen the housing market overall. The Gallatin County’s distressed sales have fallen off significantly, as seen by the tables below (click to expand):

A Deeper, Stronger Market

Distressed sales have dropped off significantly since 2011. Peaking in 2011 with 148 successful short sales, only 7 short sales took place in 2015. Foreclosure sales peaked at 298 in 2011, but have fallen to only 40 in 2015. With less homeowners falling into financial straits, non homeowners have had renewed confidence in the housing market’s ability to bring a return on their investment. Homeowners are building equity, with 97% of Montanans once again in the black.

The following graphs from the Gallatin Association of Realtors showcases how sales have fallen and how they have taken a far less significant percentage of home sales (click graphs to expand):

The Gallatin Association of Realtors did a great job showing how distressed sales have dropped, but at Hart Real Estate Solutions, we wanted to take the data a step farther. Below, we’ve analyzed how both short sale and foreclosures market shares have dropped by consistent rates since 2011, showing that the market has dropped in volatility.

Short sales have taken a smaller percentage of total home sales each year since 2011. From 2011 to 2015, short sales fell from 10.18% of all home sales to 0.3% of all home sales, representing a 97.05% share decrease.

Since 2012, short sales have seen their share of the market decrease by more than 60% each subsequent year. From 2012 (8.07% of all home sales) to 2013 (2.95% of all home sales), short sales fell by 63.44%. From 2013 (2.95% of all home sales) to 2014 (0.87% of all home sales), short sales fell by 70.51%. From 2014 (0.87% of all homes) to 2015 (0.3% of all homes), short sales fell by 65.52%.

Foreclosures have also taken a smaller percentage of total home sales each year. From 2011 to 2015, foreclosures fell from 20.50% of all home sales to 1.72% of all solds, representing a 91.61% share decrease.

Since 2012, foreclosures have seen their share of the market decrease by approximately 50% each subsequent year. From 2012 (14.55% of all home sales) to 2013 (7.47% of all home sales), foreclosures fell by 48.66%. From 2013 (7.47% of all home sales) to 2014 (3.62% of all home sales), foreclosures fell by 51.54%. From 2014 (3.62% of all home sales) to 2015 (1.72% of all home sales) foreclosures fell by 52.49%.

Summary: As distressed property sales continue to drop, local residents should only expect a stronger, deeper market. Distressed sales inevitably have sweeping impacts over the United States economy because they are usually a majority of a homeowner’s financial burden. Having less sales means there are less distressed properties. Having less distressed properties means there are less people scraping by. Now that more buyers and sellers alike have more financial breathing room to contribute to economic growth, home sales and values should continue to increase, strengthening the market overall.

For those still wondering if buyer confidence has returned to the United States Housing Market, they will be relieved when they read the new survey for released by Bankrate. According to their survey, real estate now ranks as the number one investment choice for Americans.

The company asked people how they would choose to invest their money if they had extra cash lying around. Twenty seven percent of Americans chose some form of property investment – the highest ranked answer of all other options. With signs of a normalizing real estate market, buyers are feeling confident that once again, real estate will turn in some high returns.

Buyer confidence has been climbing steadily in the last years. However, most articles discussing buyer confidence compared real estate confidence to previous years. This survey shows that confidence in real estate has now reached a point that it is also starting to compete (and beat!) other industries.

CDs and other cash investments, last year’s top answer, came in second at 23 percent. Seventeen percent of Americans would put their money in the stock market, 14% chose gold and other precious metals, and 5% chose investing in the bond market.

Coupled with low mortgage rates, high rental rates and low vacancy rates, its easy to see why an investor can see a lot of potential in real estate based investments.

Americans living in the West (35%) and urban (31%) areas showed the highest preference towards making a real estate based investment.

The South preferred real estate and cash investments. The Midwest preferred cash and stocks over real estate.

Source: http://realtormag.realtor.org/daily-news/2015/07/24/real-estate-ranks-tops-among-investments

Based on a recently released foreclosure report, the United States Housing Market looks to be continuing on its road to improvement.

Foreclosure inventory dropped by 27% in February and completed foreclosures fell by 15% year over year. Even better news… foreclosures have fallen 67% since they hit their peak in September 2010. 

Foreclosure inventory represented 1.4% of all homes with a mortgage nationwide. Although that number is lower than any number seen recently, its still more than double the 0.6% seen from 2000-2004.

Mortgages in serious delinquencies (overdue payment by more than 90 days) also dropped by 19% in February.

Lowering foreclosure totals represent a growing, stabilizing economy. For both the housing market and the overall economic outlook of the US, this is great news. As more buyers and sellers gain back their confidence and reenter the market, the more we can expect to see improvements in real estate.

Sources: http://realtormag.realtor.org/daily-news/2015/04/14/foreclosures-plunge-67-from-peak

http://www.realtor.com/news/corelogic-foreclosures-report-february-2015/

The Belgrade City / County Planning Board reapproved a 357 lot project this week—a project that had already been given the green light in 2006. The Ryan Glenn Estates project was once again approved, after the original project fell through during the recession. Glenn’s project went under after an Arkansas Bank that had funded the project had also folded. This subdivision is yet another recently approved development to increase home inventory and supply for the valley. Home values holding true, despite the increased inventory, reflect positively on the state of the market in Gallatin County.

With the re-approval of the subdivision, Ken Williams, one of the current owners, can now develop the land as it had been intended 9 years ago. The project will be built in 7 phases and is located at the corner of Penwell Bridge and Lagoon Roads.

The board added 3 variances to increase the city block length in the subdivision, eliminate curbs, and eliminate pedestrian ramps on the two major roads. The planning board also added a covenant eliminating future homeowners right to interfere with the nearby Gallatin Speedway. The board will also address the future of two of the lots in the development that are located on a floodplain. The board will decide whether to reshape them or eliminate them. Finally, the board wants to use cut-off street lighting to avoid light pollution in the area.

The growth of the Gallatin Valley has become increasingly evident. Subdivision projects like this one show that developers have regained their confidence that there are enough homebuyers waiting in the wings to legitimize the increase in supply. Bozeman and Belgrade’s home inventory has grown without creating many vacant lots, a positive sign for growth. Low mortgage rates and the lack of rentals in the area have created a deep source of potential buyers.

Source: http://www.belgrade-news.com/news/article_3f64b242-a5e0-11e4-9fe1-2bae5a6c51cc.html

According to Realtytrac, nearly 7.3 million people who have had their homes foreclosed on during the recession will once again be able to buy a home in the next 8 years. More than 500,000 foreclosed on homeowners will be eligible for a new home loan this year.

In general, homeowners can recover from a foreclosure in as little as three years. Realtytrac gives a more conservative number—seven years—for how long it will take these people to rebuild their credit score. By doing the math, homeowners who lost their homes in 2007 and early 2008 should now be able to qualify for financing.

As previously mentioned, 500,000 of these homebuyers, a.k.a. boomerang buyers, will be able to become homeowners once again in 2015. Next year, 1 million additional homebuyers will be added to the pool. By 2018, that number increases to 1.3 million. Low mortgage rates, low mortgage insurance rates, and new low down payment mortgages have also freed up more of these homebuyers.

Oddly, these buyers will most likely be able to find homes they can afford in markets that had originally put them in their unfortunate situation. Towns and districts with high foreclosure numbers during the recession still have the most affordable home prices. Hopefully, with that negative experience still on the forefronts of our national conscience and with the new government regulations enacted since, these buyers and their lenders will not find themselves falling into the same pattern that occurred during the recession.

Assuming all goes well, having more buyers return to the market will help the housing sector of the economy grow. Home prices may rise slightly, but having a big base of homebuyers should provide more stability and confidence for builders who can increase home inventory without concern.

Source: http://money.cnn.com/2015/01/27/real_estate/boomerang-homebuyers-foreclosed-return/index.html

Distressed sales have decreased this last year, dropping to the lowest since records began in 2008. These sales accounted for 9% of the total sales last month. Distressed sales can include foreclosures and short-sales. Having less distressed property sales can only suggest the economic improvement that has taken place. Budge Huskey, President and CEO of Coldwell Banker Real Estate, said in a recent interview with Bloomberg that “We (the US) are moving from a market that was driven by the overcorrection, driven by distressed asset sales, to a market that’s returning to being based on the fundamentals,” suggesting that when less distressed sales are carried out, the general market will act less volatile. Cheaper borrowing costs have also helped the situation. An average 30-year fixed rate mortgage hit 4.1% the week of August 21^st, the lowest this year. Residential construction start ups increased in July to an annual pace of 1.09 million units, the highest it had been in 8 months.

Source: http://www.bloomberg.com/news/2014-08-21/sales-of-previously-owned-homes-in-u-s-climb-to-10-month-high.html

Freddie Mac is making a bold move by threatening legal action against the city of Richmond, CA because they are planning to use eminent domain to seize underwater mortgages.

• Richmond’s Stance: In offering to buy troubled loans at below market value from mortgage companies, they are then able to write down the loan balances for the new home owners and refinance the loans into government-backed mortgages. IF the mortgage companies refuse to allow them to buy the loans, they city will play the eminent domain card and seize them. This whole plan is theorized to help residents curb the loan debt and avoid foreclosure. Circumventing the federal government in this process is the key point. Richmond officials hope this new method will speed up the currently stagnantly moving foreclosure aid assistance. “We’re not willing to back down on this,” says Richmond Mayor Gayle McLaughlin. “They can put forward as much pressure as they would like, but I’m very committed to this program, and I’m very committed to the well-being of our neighborhoods.”

Richmond is not the only city considering this option for their residents. About two dozen local and state governments — including Newark, N.J., Seattle, and several other cities in California — have been considering similar uses of eminent domain. 

• Freddie Mac’s Stance: Voicing cautionary rhetoric, Freddie Mac feels the loan sales will be made only under pressure instead of being clean, tidy, and voluntary as assumed by Richmond. Freddie Mac and its backer, the Federal Housing Finance Agency, are considering taking legal action against such a plan.

This new method of circumvention may threaten real estate recovery. "We are concerned that the proposed use of eminent domain would slow the return of private capital to the housing finance system, and threaten our fragile housing recovery," writes California House Republicans John Campbell, Gary G. Miller and Ed Royce in a letter to Housing and Urban Development Secretary Shaun Donovan. "We do not believe this is appropriate public policy, even if this use of eminent domain were to survive the inevitable legal challenges that would follow any decision to seize mortgages.”  

Freddie Mac Considers Legal Action to Block Eminent Domain Plan

http://realtormag.realtor.org/daily-news/2013/06/13/congress-hud-eminent-domain-proposal-threatens-recovery

http://realtormag.realtor.org/daily-news/2012/06/13/can-eminent-domain-be-used-take-over-mortgages

In this week alone, the average 30-year fixed-rate mortgage rose 10 percentage points to 3.91% and are up from 3.3% seen in early May. 15-year loans are up from their 2.56% to 3.03% as well. This trend does not look like it will change. “It’s unlikely that rates will ever be that low again.” said Doug Duncan, Fannie Mae's chief economist.

Here are some of the reasons why:

• THE FED

The Fed has been stepping in and actively keeping rates at rock-bottom levels by buying up to $85 billion/month of Treasury bonds and mortgage-backed securities. This purposeful manipulation of the market has enabled lenders to sell mortgage loans at lower interest rates and recoup their money plus profits. Now with the market recovering, the Fed will stop purchasing the securities and private investors will have to pick up the slack.

• THE ECONOMY

Economic conditions have improved severely compared to the recession of four years ago. With the economic health on the mend, it is creating a tailwind of interest rate increased. Low rates happen in a time of distress to stimulate. Higher rates happen when the market improves in order to stabilize.

• 3.3% RATES ARE UNPRECEDENTED

 Even if the rates increase by a percentage or two, those new numbers will be comparatively low to the average. Historically, 30-year loans are above 5.5%. “For clues to the direction of mortgage rates, look at the daily movements in 10-year Treasury bond yields. Mortgage rates track Treasury yields with the difference between them holding fairly constant. Today, Treasury bonds have been on a jumpy uphill climb, with the 10-year hitting 2.21% on May 31, its highest closing since April 2012. On Thursday, the yield was about 2.10%. Since the interest rate on a 30-year is usually 1.7 to 2 percentage points higher, it indicates that mortgages should be at between 3.82% and 4.12% this week.” http://money.cnn.com/2013/06/06/real_estate/mortgage-rates/index.html

Median Existing Single-Family saw their largest annual gain in more than seven years in the first quarter of 2013. The median home price rose from $158,600 to $176,600, a gain of 11.3%!

“The supply/demand balance is clearly tilted toward sellers in a good portion of the country,” said NAR Chief Economist Lawrence Yun. “Inventory conditions are expected to remain fairly constrained this year, so overall price increases should be well above the historic gain of one-to-two percentage points above the rate of inflation.  If home builders can continue to ramp up production, then home price growth is expected to moderate in 2014.” - See more at: http://www.inman.com/2013/05/09/home-prices-post-highest-gain-in-over-7-years/#sthash.KboECc0L.dpuf

Great news right! Not so fast…

Some dark shadows are brewing on the real estate horizon. Looking at who is leading the recovery, the rate at which the market is recovering, and the future governmental programs all paint a picture a little different than the major headlines.

This market boom is being spearheaded by investors. Seeing the low interest rates in conjunction with the depressed home prices, investors are able to move with more assurance and speed then the average home buyer. Once prices rise, many of these investors will pull back—leaving a hole in the market again.

"These days, I worry more about the economy hurting housing than housing hurting the economy," said Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities, a Washington D.C.-based think tank. Employment is intimately integrated with the housing market and hiring has slowed since March—the weakest growth since last June. Discouraged workers are increasingly leaving the workforce hinting that the housing market recovery will being slowing more and more. Once the jobs market improves, there will be a direct surge in the housing market once more.

Governmental cuts, $85 billion, will be hitting their peak this summer. The cuts will hit the gut of the American workforce since workers comp, military spending, the expiration of payroll tax breaks, and other pieces will all contribute to overall loss of income—impacting the spending capabilities of many families.

http://money.cnn.com/2013/04/18/real_estate/housing-recovery/index.html

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