We are right now in a unique situation not seen before. I thought it prudent to research how Coronavirus is affecting the economy and Bozeman real estate market
Our lives have changed drastically in the past week; kids are home from school, trips have been cancelled, gathering places closed. We also have anxiety about what is going on out there; not only do we have anxiety about being ill, or perhaps carrying the virus to someone who may be at risk for serious complications from the virus, but we also have anxiety about the fact that our financial world has been turned upside down. This perhaps brings back bad memories of the 2008 crash and the recession that followed.
So let’s try and address some of these anxieties caused by the Coronavirus outbreak:
First of all, you are doing everything right if you are following the steps recommended by the CDC. https://www.cdc.gov/coronavirus/2019-ncov/index.html These steps are in your control and should keep you and your household healthy. Do them and feel good about it!
At Windermere, we are fortunate enough to be backed up by a strong company with many resources. Some of our financial and economic experts have reached out to us to explain how they see the economic impact of this and the effect on local housing market.
Following is a summary of likely effects of the Coronavirus to the US economy as a whole.
These were communicated by Matthew Gardner, Chief Economist for Windermere.
- The Economy will contract. With the disruption to life, travel etc., we are all spending less money.
- The Stock market has lost value as a result of the uncertainty of the situation and how long it will continue.
- Home inventory on market will probably decrease in the next few months as people will not want others in their homes.
- Buyers will want to take advantage of low interest rates but buying will probably decrease as well as people are uncertain about economy and some may need to wait for stock market to come back up.
- Economists believe that towards Q3 and Q4, economy and stock market will pick back up.
- Mortgage interest rates will stay low however.
- Housing as a sector is well positioned to come out of this positively.
- Banking rules that were put into place after 2008 have protected housing and made sure that the upside down equity positions held by people then do not exist anymore.
- Inventory will be tight as households are being created but not enough housing being built overall in US.
An analytical look at Coronavirus and Bozeman real estate:
- Our area is positioned well to weather this kind of storm. We will see some impacts as noted above but we will also rise out quicker than other areas of the country.
- Why? Our fundamentals are strong.
- Bozeman area is noted as #1 in economic strength for micropolitan areas in US. https://www.prnewswire.com/news-releases/policoms-2018-economic-strength-rankings-for-933-communities-announced-300585848.html
- We have had increased demand and not enough supply of homes for many years. This has meant that our median price of a single family home has gone from $329,000 in March of 2015 to $520,000 in February of 2020 and our months of supply has gone from 4.3 months in March of 2015 to 2.2 in February of 2020.
- Our unemployment rate is very strong most recently being at 2.4% down even from a year ago when it was 3.%. The highest is has been since 2015 is 3.4%. The interesting thing here is that US Federal Reserve puts natural unemployment at 2.5-3.5% as people move around, change jobs etc.
- Bozeman is a unique place to live as we all know and why it attracts so many new residents each year. Our quality of life, access to the outdoor activity, ability to earn a living make it truly distinctive. This will not change.
In the immediate future, what will happen?
- We will have at least two weeks of social distancing to help prevent the spread of this virus.
- Diagnosed cases will rise because of increased testing.
- The strategies that the CDC and government have recommended to prevent spread will work.
- There will be positive news about a vaccine for the future.
- Discomfort and anxiety will continue in our lives and in the financial markets until things become certain and we have started to see decreasing cases.
- There is a massive fiscal stimulus coming that is pointed at people and industries most affected by this.
- Recovery will happen relatively quick as our US economy fundamentals are strong.
I will continue to update my blog MoveMeToMontana.com with more information and analysis as I get it.
A disclaimer – I am not an economist but am culling information from economist’s opinions and presenting factual statistics about Montana. However, one should read this article about how Coronavirus is affecting the economy and Bozeman real estate market as my opinion. I have curated the information and summarized it in this piece.
Stay healthy and please do what you can to help local businesses! Shop online with them, order take out, buy gift cards. They really need our help right now.
Presenting Bozeman Real Estate Statistics for the first two months of 2020! And if anyone thought that we were going to have a slow winter in real estate, they would be incorrect.
Let’s start off with Median Sales Prices.
As seen below, we can see that all property type prices are off to fast start with a roughly 8% increase over last year. To put things in greater perspective, the February numbers of 2018 and 2019 for median sales prices were : 418,000 (2018) 456,375 (2019) for Single Family Home, 253,000 (2018) 289,900(2019) for Condos, 305,000 (2018) 334,950 ((2019) for Townhomes.
Days on Market
To fill in our view of the real estate market in Bozeman, let’s take a look at how quickly inventory is moving off of the market or being sold. We typically measure this by the absorption rate which we call Days on Market.
Here we see that Single Family DOM is down 16.7% or has gone from 24 days last year to 20 days that year, reflecting healthy demand that builders are not quite keeping pace with. There is better news with Condos and Townhomes as those Days on Market have actually increased a bit.
How much supply is there?
To finish rounding out our view of Bozeman Real Estate Statistics, let’s look at how many months of supply we have at the moment. Again here we see a modestly declining inventory of Single Family Homes with increasing inventory of Townhomes and Condos.
One note on the coronavirus. Currently the coronavirus has not impacted the Bozeman real estate market except to drop home interest rates precipitously so that they are at lowest levels in 50 years! This certainly will rachet up demand as potential buyers look to take advantage of lower interest rates to afford more house or have a lower mortgage payment. Keep an eye on my blog as the picture becomes more clear and the medium and longer terms effect come into focus. For more on interest rates, try this website. http://www.mortgagenewsdaily.com/
These numbers in this report reflect sold pricing. Remember that Montana is a nondisclosure state so only licensed real estate professionals can access accurate data. If you would like to dive deeper into market trends or specific price categories, please reach out and let’s have a conversation!
I hope you found this helpful – please pass it on and check out my other blog posts at MoveMeToMontana.com.
Over the weekend, I taught a first time home buyer seminar. I love helping first time homebuyers get into their first home because it means so much not only emotionally but also financially. It is the start of a secure financial future that can help you all the way through your retirement. Now is a particularly good time to purchase a home as interest rates are at multi year lows, inventory is better than it has been in a while, prices are still increasing but at a less rapid rate and there are plenty of low downpayment programs and down payment assistance options.
I want to focus today’s blog though on exactly how and why you are creating wealth as a first time home buyer and is an important building block of your portfolio and financial future.
The example that I used in the seminar is pictured on this white board photo and I will bullet point it out so it makes sense.
Case #1 – Rent
First assumption is that a person rents an apartment for $1000 a month.
The $1000 goes to the landlord.
The benefit received by the renter is a place to live. The renter is not paying off a larger debt to eventually own the home outright. ( Unless this a very rare lease to own situation)
There are no tax benefits associated with paying rent.
Case #2 – Purchase home with financing , usually from a financial institution.
This person has purchased a home with lender financing and pays $1000 a month to the lender.
What happens to that money is the interesting part
Part of it (I am using $500 a month in my example below) goes to the bank as interest to pay the bank for using their money. But the other part of the $1000 payment goes to pay principal on your loan. Principal is the part of the purchase price that you borrowed to purchase that house. Every principal payment increases your ownership in the house as you owe the bank less with each payment you make.
In my example, $500 a month goes to principal which turns into $6000 a year. In the space of one year, you have will have reduced your debt by $6000 and that continues for as long as you have that loan.
So that’s a bit of wealth creation right there as you own more and more of a valuable asset. The money that you pay off is considered your equity in your home.
But that’s not all…you will also be able to take advantage of an appreciating real estate market.
I know we all like to complain about rising home prices but did you think that the flip side is that if you actually own a home with the help of a lender, the rising home prices increase the value of your home too! And guess what, the bank doesn’t get any of that, its all yours!
You may not touch that equity and wealth for many years but you may want to consider what it can do for you.
Some examples :
- The equity that you earn simply by paying your mortgage and letting your home appreciate may provide a large down payment for your next home, say if you needed another for a growing family.
- It can help pay for a second home or an investment property
- The equity from the first home may help pay for kids schooling
- It can serve as nice retirement nest egg
To recap the benefits that one gains from paying a mortgage over rent:
- The interest portion of your payment is tax deductible
- The principal portion of your payment pays off debt (good for the credit score), increases your ownership in that house and creates wealth as your equity builds
- The value appreciation which increases your equity in that home belongs only to you, not the bank.
- You have a solid financial wealth tool that can be used later for when you need it.
That first home with very little down can be a springboard to financial security down the road. Purchasing a home is really one of the best leveraged investments you can make. Now is a great time to take advantage of this just because of the all of the positive market conditions and available money at low rates.
Please reach out and let’s talk more about more about creating wealth as a first time home buyer!
Check out my website and blog http://movemetomontana.com
For more on mortgage rates, check here http://www.mortgagenewsdaily.com/reports/newsletter
There are quite a few options out there when choosing a real estate agent to help you sell or purchase your home. Why should you choose Windermere?
I write this blog having been a Windermere agent for 10 years in Seattle and having just joined the Windermere office in Downtown Bozeman. Here are my reasons why I think Windermere has more to offer than other firms.
- Windermere is committed to providing their agents with the most up-to-date technology and tools to do their jobs. That means that you, as the client, have access to the most recent data and marketing techniques to accomplish your goals. Did you know that the Windermere company has a Chief Economist on staff who interprets past data but also does economic projections so we are ahead of the trend curve? And in these turbulent times, who doesn’t need a little help making sense of it all?
- Windermere offices and their agents are committed to their communities. Every agent donates money to the Windermere Foundation which then distributes money and help to local charities. Each Windermere office aligns itself with a charitable cause every year and sponsors Community Service Day to work for that cause.
- Windermere agents and their offices are woven into the fabric of the community they serve. Look around next time you are at a neighborhood meeting or chamber of commerce and I bet you will encounter a Windermere agent.
- Windermere is a family. While that may not seem important to a client, it is. We receive all kinds of support from our office owner and the corporate entity that helps us be better agents. We have educational opportunities not only on topics such as technology and trends but things like time management, work/life balance, social media training etc. Our agents spend time together discussing and sharing obstacles, opportunities and successes. You can be sure that a member of the family will always be supported by the rest of our office and our company. We are all there for you.
I hope that you can see that I love Windermere and believe in its values as a company. I believe that we are held to a very high standard by our company because they give us so much to work with and want the best agents in the community and marketplace working for them. In turn, you get the best agents and the best company working for you!
All In, For You.
Take a look at this video that our office recently put together. So much fun.