After a strong 2015, Billings-area brokers and lenders say they see headwinds that could ease the pace of the housing market, but they expect another solid year.
This year “will be strong, but I don’t think we’ll see the increases that we’ve seen in the past few years. You talk about the coal industry, the oil industry being down,” said Dana Wagenhals, broker/owner of Billings-based Metro Realtors West.
Low coal and oil prices have forced companies to lay off workers across the region, which cuts into housing demand. Interest rates, while still low, are expected to creep up this year following the Federal Reserve’s December rate hike, the central bank’s first in six years. Home inventory, particularly in Billings, remains tight.
But on the plus side, the region’s housing market has continued to improve in the post-recession era.
Home sales in south central Montana totaled $645 million last year, up about 8 percent in the same region in 2014, according to the Billings Association of Realtors.
(The association includes annual numbers for Eastern Montana, Lewistown and Havre, but the bulk of sales and listings are within an hour’s drive of Billings.)
Sale-dollar volumes in both 2015 and 2014 are higher than the pre-recession high of $566 million in 2007. Average prices in Yellowstone County were about $230,000 in December and were relatively unchanged compared to the same time the previous year, according to the Realtors’ association.
In the Billings area, a low supply of four-and-a-half months of homes is available, which brokers say is leading to competing offers from buyers.
“The minute that something goes on the market, it’s like a food frenzy. If it’s priced right, and clean, it’s going that day,” said Wagenhals, who also serves as president of the Billings Association of Realtors.
Brokers and lenders are keeping an eye on future action from the Federal Reserve, the nation’s central bank that controls lending rates from bank to bank.
On Dec. 16, officials from the Fed announced they were raising rates a quarter point after six years of staying near zero. The action did not have an immediate effect on mortgage rates, which are set by Wall Street through mortgage-backed securities, but will add pressure for increases this year.
That’s because a Fed increase is a sign of confidence in the economy, which can translate into higher mortgage rates, banking experts say. Fed officials have indicated they’ll consider more small increases this year.
The higher mortgage rates haven’t come to many Billings banks. Wayne Nelson, president of Stockman Bank, the city’s largest home lender, said Wednesday that rates were 3.75 percent on a 30-year mortgage, the same as before the Fed action.
News of the rate hike spurs action from potential buyers on the fence, Nelson added.
“If people think that rates are going to take off, they’re thinking, ‘I better go lock it in and get it done,’” he said.
At Stockman Bank, Billings’ largest home lender, refinancing of mortgages is tapering off after a scramble to lock in a low rate, Nelson said.
Stockman’s home loan portfolio was $184 million in 2015, he said.
Despite the economic headwinds in 2016, Nelson said he expects the Billings market to endure because of the diverse economy and the fact the city is not overbuilt. Last year, builders filed 413 permits in Billings for single-family homes, up 5 percent from 2014, according to city building records.
Other lenders said they’ve seen a boost from the Fed action during the normally chilled winter months.
“Our market has heated up over what it is normally for this time of year. I am busier than a cat on a hot tin roof,” said Pam Adams, owner of Billings firm Guardian Mortgage.
Adams has owned the small, one-office brokerage on Billings West End since 1999, and she works with her son. This month, she said she’s looking to hire a new loan officer to keep up with demand. Guardian has 15 active files now, and Adams said she was working on four in one day last week.
For area brokers, interest is also beginning to spark this month, even if sales will come months later.
Linda Parker, managing partner at Billings-based Berkshire Hathaway Prudential Floberg Realty, said her agents have had good turnouts at recent open houses, months before the hot selling season.
“It seems that the buyers are out there… It takes awhile for the market to get going,” Parker said last week.
In November, about 38 percent of the sales in her office were between $200,000 and $300,000, she said. About 12 percent of Berkshire Hathaway’s sales were on the upper end, between $300,000 and $400,000, she added.
JR Chapman, broker/owner of ReMax of Billings, said his volumes were down slightly last year, which he attributed to losing a few agents during the year. The office fluctuated between 22 and 26 agents over the year.
Chapman added that lengthening wait times to close deal delayed sales, but he’s optimistic for 2016.
“I think we’ll maintain our market share,” he said.