PureWest - Market Insights by Stan Feagler

Improving Real Estate Market in Big Sky Mirrors National Vacation Home Trend

Stan Feagler — Mon, 10 Jan 2011 15:38:00 GMT

The Wall Street Journal published an article today highlighting the improving market for Vacation homes in a number of resort communities across the country. Several of the trends noted in the article mirror what is happening in Montana's Big Sky Ski Resort.

In 2010, Big Sky saw overall sales transactions increase by almost 50% as buyers jumped off the sidelines, often with cash. The overall dollar volume of sales in Big Sky was also up, but by only 15% as the average price fell 17% between years. PureWest Christie's Great Estates agents in Big Sky say that buyers who have been watching on the sidelines now believe the bottom is probably behind us and are moving to take advantage of bargain prices still available.

The upward trend in vacation homes defies expectations for home prices nationally where experts are calling for a further decline of 5% - 10% in home prices due to excess inventory, foreclosure pressure and the difficulty in obtaining mortgage finance.

The difference with the vacation home market is that prices fell much further and much faster. In Big Sky, home prices are down from the 2007 peak by over 50% and while credit for vacation homes is often only available with crystal clean credit and 25% down, luxury home buyers are coming to the closing table with cash so as to not pass up deals in some of the nation's most exclusive resorts.

Buyers are oftentimes affluent baby boomers looking for a family gathering spot on holidays and a place they can semi-retire when the time is right. Technology is helping the trend as owners schedule longer and longer stays in their mountain locations making them a nice replacement office away from the city grind.

Stan Feagler, PureWest - Christie's Great Estates

Bozeman, Big Sky & Paradise Valley

By S. MITRA KALITA

Sales in many vacation communities across the U.S. soared last year to levels not seen since boom times, driven by deep discounts, cash purchases and buyers' rising stock portfolios.

On Mercer Island, Wash., waterfront sales nearly tripled in 2010, compared with a year earlier, reaching par with 2006 volume there. Sales on Hilton Head Island, S.C., rose 14% for the year. Palm Beach, Fla., experienced a 40% annual increase and a 54% increase in homes under contract, indicating an especially strong fourth quarter. Palm Beach sales volume now is comparable to its 2007 peak. These figures were gleaned by brokers in each locale.

"The proverbial train has left the station," said Ned Monell, an agent with Sotheby's International Realty in Palm Beach. "We haven't felt energy like this in a long time. Buyers sense that they've been on the sidelines long enough."

The question now is whether the momentum will last. The strength of second-home sales paints a stark contrast to the overall housing market, which is expected to worsen in 2011.

Existing-home sales in November rose 5.6% on an annualized basis, according to the National Association of Realtors, a trade and lobbying group. Last month, the Case-Shiller housing index of 20 cities showed prices across the U.S. fell in October, and most analysts predict another 5% to 10% slide in the coming year.

Data for the nationwide vacation-home market aren't tracked regularly. The National Association of Realtors conducts an annual survey of home buyers, but results for 2010 won't be out till March.

Yet the market for vacation homes, based on local sales data, appears to be booming. The comeback, NAR economist Lawrence Yun said, has been helped by gains in the stock market and an improving economy, which have made wealthier Americans more upbeat about the future. "It also implies that prices in some markets have come down so much that people are fighting for those properties," said Mr. Yun, noting that demand is strongest in areas close to stable labor markets.

According to the NAR, one in 10 real-estate transactions in 2009 was for the purchase of a vacation home. And though a small fraction of the overall market, it is significant because vacation homes are often big-ticket properties and attract discretionary buyers. Just four houses sold last year on Madeline Island, Wis., for example, but the island's average dwelling sells at two to three times the price of the county average, said Eric Kodner, a realty broker on the island.

Sales of second homes are showing an uptick even in more-affordable communities. In some locations, prices are even inching upward. Cape Cod sales climbed nearly 9% in 2010 from 2009, while prices rose 7%. Monroe County, Pa., in the heart of the Pocono Mountains, saw a 3% decline in transactions, but its Lake Naomi resort community was up nearly 15%. A one-acre plot off Lake Naomi recently fetched $1.1 million, a record deal for the area.

Still, in most markets where demand has improved, prices haven't. For Realtor Andy Twisdale in Hilton Head, S.C., it is too soon to rejoice; prices are down almost a third over the past five years. "People are buying at the very low end of the product," he said. "The financing is very difficult. Banks are requiring 25% down and crystal clean credit."

Buyers who qualify or can pay cash say this is the time to take the plunge. On New Year's Day, the Makarewicz family arrived in Pocono Pines, Pa., to look for a vacation home. They already own their primary residence in northern New Jersey and own a property in Damascus, a northeastern Pennsylvania town along the Delaware River. But the family says the latter doesn't offer enough things to do: Not enough shopping. Not enough activities for kids. Not even enough fish.

"How's the bass here?" Joe Makarewicz, a vice president for sales at a financial-services firm, asked Re/Max Realtor Rob Baxter as the two looked at floor plans.

The family plans to sell the Damascus house, which would allow them to pay cash for one near Lake Naomi. The resort community at Lake Naomi boasts pools, tennis courts, a recreation center and a golf course—and is equidistant from New York and Philadelphia.

Some second homes had been stuck on the market because sellers wouldn't budge on price; unlike owners of primary homes, they often aren't in a hurry to move.

"Sellers have become aware that they have to price their homes accordingly," said Harald Grant, a senior vice president at Sotheby's in New York's ritzy Hamptons region. "There's a perk in the market because a lot of prices have come down to where they should be."

This shift became clear to K. David Hirschey, who runs a consulting business in Minneapolis, as he hunted for a home on Madeline Island.

After competing in a summer swimming competition on the island, Mr. Hirschey decided to buy a home there, perhaps to rent it a few years and maybe retire there eventually. The first offer he made was rejected, he recalled, because the seller said, "We don't negotiate on properties here." The same thing happened with his bid on the next house.

Then he found a third property—four bedrooms, three baths—that began as a sale by owner, was taken off the market, then relisted under one broker, then another. It had been initially priced at $1.25 million, and remained on sale for two years.

"When I saw it, it was listed at $687,000," said Mr. Hirschey, a father of four children. He offered $530,000, furnishings included. "They wanted to negotiate and I said no," he said.

The tactic—an all-cash offer—worked, and Mr. Hirschey closed on the house in November, just in time for his family to spend the holidays there.

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Existing-Home Sales Resume Uptrend with Stable Prices reposted by Jason Frey

Jason Frey — Tue, 28 Dec 2010 22:23:00 GMT

Existing-home sales got back on an upward path in November, resuming a growth trend since bottoming in July, according to the National Association of Realtors®.

Existing-home sales¹, which are completed transactions that include single-family, townhomes, condominiums and co-ops, rose 5.6 percent to a seasonally adjusted annual rate of 4.68 million in November from 4.43 million in October, but are 27.9 percent below the cyclical peak of 6.49 million in November 2009, which was the initial deadline for the first-time buyer tax credit.

Lawrence Yun, NAR chief economist, is hopeful for 2011. “Continuing gains in home sales are encouraging, and the positive impact of steady job creation will more than trump some negative impact from a modest rise in mortgage interest rates, which remain historically favorable,” he said.

Yun added that home buyers are responding to improved affordability conditions. “The relationship recently between mortgage interest rates, home prices and family income has been the most favorable on record for buying a home since we started measuring in 1970,” he said. “Therefore, the market is recovering and we should trend up to a healthy, sustainable level in 2011.”

The national median existing-home price² for all housing types was $170,600 in November, up 0.4 percent from November 2009. Distressed homes³ have been a fairly stable market share, accounting for 33 percent of sales in November; they were 34 percent in October and 33 percent in November 2009.

Foreclosures, which accounted for two-thirds of the distressed sales share, sold at a median discount of 15 percent in November, while short sales were discounted 10 percent in comparison with traditional home sales.

Total housing inventory at the end of November fell 4.0 percent to 3.71 million existing homes available for sale, which represents a 9.5-month supply⁴ at the current sales pace, down from a 10.5-month supply in October.

NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., said good buying opportunities will continue. “Traditionally there are far fewer buyers competing for properties at this time of the year, so serious buyers have a lot of opportunities during the winter months,” he said. “Buyers will enjoy favorable affordability conditions into the new year, although mortgage rates are expected to gradually rise as 2011 progresses.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 4.30 percent in November from a record low 4.23 percent in October; the rate was 4.88 percent in November 2009.

“In the short term, mortgage interest rates should hover just above recent record lows, while home prices have generally stabilized following declines from 2007 through 2009,” Yun said. “Although mortgage interest rates have ticked up in recent weeks, overall conditions remain extremely favorable for buyers who can obtain credit.”

A parallel NAR practitioner survey shows first-time buyers purchased 32 percent of homes in November, the same as in October, but are below a 51 percent share in November 2009 from the surge to beat the initial deadline for the first-time buyer tax credit.

Investors accounted for 19 percent of transactions in November, also unchanged from October, but are up from 12 percent in November 2009; the balance of sales were to repeat buyers. All-cash sales were at 31 percent in November, up from 29 percent in October and 19 percent a year ago. “The elevated level of all-cash transactions continues to reflect tight credit market conditions,” Yun said.

Single-family home sales rose 6.7 percent to a seasonally adjusted annual rate of 4.15 million in November from 3.89 million in October, but are 27.3 percent below a surge to a 5.71 million cyclical peak in November 2009. The median existing single-family home price was $171,300 in November, which is 1.2 percent above a year ago.

Existing condominium and co-op sales declined 1.9 percent to a seasonally adjusted annual rate of 530,000 in November from 540,000 in October, and are 32.2 percent below the 782,000-unit tax credit rush one year ago. The median existing condo price⁵ was $165,300 in November, down 5.5 percent from November 2009. “At the current stage of the housing cycle, condos are offering better deals for bargain hunters,” Yun said.

Regionally, existing-home sales in the Northeast rose 2.7 percent to an annual pace of 770,000 in November but are 33.0 percent below the cyclical peak in November 2009. The median price in the Northeast was $242,500, which is 9.2 percent higher than a year ago.

Existing-home sales in the Midwest increased 6.4 percent in November to a level of 1.00 million but are 35.1 percent below the year-ago surge. The median price in the Midwest was $138,900, down 1.1 percent from November 2009.

In the South, existing-home sales rose 2.9 percent to an annual pace of 1.76 million in November but are 26.1 percent below the tax credit surge in November 2009. The median price in the South was $148,000, down 2.6 percent from a year ago.

Existing-home sales in the West jumped 11.7 percent to an annual level of 1.15 million in November but are 19.0 percent below the sales peak in November 2009. The median price in the West was $212,500, up 0.4 percent from a year ago.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

¹Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings. This differs from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which generally account for 85 to 90 percent of total home sales, are based on a much larger sample – more than 40 percent of multiple listing service data each month – and typically are not subject to large prior-month revisions.

The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.

Single-family data collection began monthly in 1968, while condo data collection began quarterly in 1981; the series were combined in 1999 when monthly collection of condo data began. Prior to this period, single-family homes accounted for more than nine out of 10 purchases. Historic comparisons for total home sales prior to 1999 are based on monthly single-family sales, combined with the corresponding quarterly sales rate for condos.

²The only valid comparisons for median prices are with the same period a year earlier due to the seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if more data is received than was originally reported.

³Distressed sales, first-time buyers, investors, all-cash transactions and data for contract cancellations, etc., are from a survey for the Realtors® Confidence Index, scheduled to be posted January 7.

⁴Total inventory and month’s supply data are available back through 1999, while single-family inventory and month's supply are available back to 1982 (prior to 1999, condos were measured quarterly while single-family sales accounted for more than 90 percent of transactions).

⁵Because there is a concentration of condos in high-cost metro areas, the national median condo price generally is higher than the median single-family price. In a given market area, condos typically cost less than single-family homes.

New Home Sales Rise in November but Expiry of Homebuyer Tax Credit

Stan Feagler — Mon, 27 Dec 2010 04:05:00 GMT

Seasonally adjusted sales of new homes rose 5.5% in November but the best news is that the number of new homes available for sale fell to 197,000 or 8.2 months, the lowest level since 1968. One must keep in mind that the big overhang on the market is the vast overbuilding that took place since 2000 and the resulting stock of existing homes for sale will but some estimates take two years to absorb.

The two articles below summarize and analyize the recent Case Shiller release of November single-family home sales data. To read the full articles:

Reuters Article

WSJ

New single-family home sales rose in November but to a lower- than- expected rate , a government report showed on Thursday, highlighting the weakness in the housing market even as the broader economic recovery gains momentum.

The Commerce Department said sales increased 5.5 percent to a seasonally adjusted 290,000 unit annual rate after a downwardly revised 275,000 unit pace in October.

Analysts polled by Reuters had forecast new home sales rising to a 300,000 unit pace in November from a previously reported 283,000 unit rate. Compared to November last year, sales were down 21.2 percent.

Housing remains mired in weakness against the backdrop of a 9.8 percent unemployment rate and high foreclosures. Data on Wednesday showed sales of previously owned homes rose last month but remained at depressed levels.

At November's home sales pace, the supply of new homes on the market fell to 8.2 months' worth from 8.8 months' worth in October. There were 197,000 new homes available for sale in November, the lowest since March 1968.

The median sales price for a new home increased 8.0 percent last month from October to $213,000. Compared with November last year, the median price fell 2.7 percent

A Look at Case-Shiller, by Metro Area (October Update)

The S&P/Case-Shiller Composite 20 home price index, a broad gauge of U.S. home prices, posted a 1.7% increase from 2009, but the gains decelerated sharply in the waning days of government tax credits and 12 of 20 cities posted year-over-year declines.

On a monthly basis, 15 cities notched declines from July, compared to just eight month-on-month drops in the July report. Seasonal variations can distort month-on-month comparisons. Based on a seasonal adjustment calculated by S&P, no city posted a monthly home-price increase in August.

“Given the continued influx of distressed properties – which make up about one third of sales – it is hard to make a case for significant price appreciation,” said Dan Greenhaus at Miller Tabak+ Co. “Furthermore, given the ongoing supply/demand imbalance, we remain of the belief that further declines in prices simply have to be realized in order to help clear the market in an efficient manner.

Stan Feagler - Owner

PureWest Christie's Great Estates

Bozeman, Big Sky, Paradise Valley Montana

Existing Home Sales Rise 5.6% and New Home Sales Rise 5.5% in November

Stan Feagler — Sun, 26 Dec 2010 02:42:00 GMT

Existing home sales rose 5.6% in November and ew home sales rose 5.5% in November to 290,000 units.

Existing home sales were 4.68 million annualized in November 2010, up from 4.43 million in October but down 18% from the peak of 5.65 million in 2007. (NATIONAL ASSOCIATION OF REALTORS®) -Statistics of Existing Home Sales and Averge Prices

Novemember sales were down substantially from the prior November but the Homebuyer Tax Credit accelerated sales into last year at the expense of sales after the credit expired.

Total Existing Home Sales -- Annual
2007 5,652,000

2008 4,913,000

2009 5,156,000

Total Existing Home Sales -- Monthly
2009 Nov 6,490,000

2010 Oct 4,430,000

2010 Nov 4,680,000

The average price of a home sold in the United States was $170,600, up over 5% from October but down 22% from $219,000 in 2007.

Average Sale Price of Existing Homes - Annual

2007 $219,000

2008 $198,100

2009 $ 172,500

Average Sale Price of Existing Homes - Monthly

2009 Nov $170,000

2010 Oct $170,400

2010 Nov $170,600

Read full NAR Press Release

See PureWest Christie's Great Estates Site

Existing-Home Sales Resume Uptrend with Stable Prices

WASHINGTON , December 22, 2010

Existing-home sales got back on an upward path in November, resuming a growth trend since bottoming in July, according to the National Association of Realtors®.

###

NOTE: NAR also tracks monthly comparisons of existing single-family home sales and median prices for select metropolitan statistical areas, which is posted with other tables at:www.realtor.org/research/research/ehsdata. For information on areas not included in the report, please contact the local association of Realtors®.

NOTE: News release dates have been moved up for 2011. Existing-home sales for December will be released January 20, 2011, and the next Pending Home Sales Index is scheduled for December 30, 2010; release times are 10:00 a.m. EST.

Information about NAR is available at www.realtor.org. This and other news releases are posted in the News Media section. Statistical data in this release, other tables and surveys also may be found by clicking on Research

Stan Feagler

Owner PureWest Christie's Great Estates

Bozeman and Big Sky Montana

Summary Box: New home sales rise 5.5 percent

By The Associated Press, 12.23.10, 06:51 PM EST

HOME SALES: More people bought new homes in November, with sales rising 5.5 percent to an annual rate of 290,000 units, up from an October sales pace that had been the second-lowest on records that go back 47 years.

HOME PRICES: The median price of a new home sold last month was $213,000, 2.7 percent lower than a year ago.

Economists say it could be three years before housing has recovered enough to get back to a more normal pace of 600,000 new homes sold annually.

http://www.forbes.com/feeds/ap/2010/12/23/real_estate-us-new-home-sales-summary-box_8222796.html?boxes=marketschannelwires

Case Shiller - The Real Estate Markets That Will Thrive and Fall in 2011

Stan Feagler — Sat, 25 Dec 2010 00:21:00 GMT

Well, Big Sky and Bozeman didn't make the top 10 Real Estate Markets that will Thrive in 2011 but they also didn't make theCase Shiller: Top 15 Markets That Will Fall in 2011

Neither did any other resort or mountain communities.&http://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.com#160; While Big Sky experienced the price run-up in 2007 -2008, Bozeman home prices remained less inflated and have seen less decline as a result, at least in the $300,000 and below range.&http://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.com#160; PureWest Christie's Great Estates Agents have experienced a dearth of transactions over $1.0 mm during the first half of 2010 but the luxury home market in Bozeman is beginning to thaw.&http://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.com#160;

With an unemployment rate of 7.2% in November, Montana is well below the national average and despite the recent recession, Bozeman has continued to grow at over 3% anually.&http://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.com#160; Macro demographic trends all favor relocation to Bozeman.&http://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.com#160; Mountains, skiing 30 minutes away, three blue ribbon trout streams, hunting, hiking and camping for the outdoors enthusiast, and the friendliest population North of the Mason- Dixson line.&http://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.com#160;

All these growth trends bode well for Bozeman real estate.&http://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.com#160; It's a place where the young life-style oriented professional wants to live and companies like Right Now Technologies find a willing pool of talented employees ready to move.&http://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.com#160;

While Bozeman may not have made the Case Shiller top 10 list, it is probably due more to size than projected percentage growth

&http://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.com#160;

The 10 Real Estate Markets That Will Thrive in 2011

Gus Lubin and Anika Anand | Dec. 20, 2010, 1:47 PM | 58,117 | 5

Image: StevenM_61 on flickr

A few islands of safety in a double dipping national housing market are found in the South and Midwest.

&http://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.comhttp://www.purewestproperties.com#160;

Trulia's Tara-Nicholle Nelson says these areas "never had the inflammatory price bubble in 2005-06, so they simply haven't had the dramatic price deflation or foreclosure crisis experienced in other parts of the country."

San Francisco also makes the list based on strong secular trends.

Trulia picked the top markets based on affordability and trends in job growth and migration

Case Shiller: Here Are The 15 Housing Markets That Will Fall The Most By 2012

Gus Lubin and Leah Goldman | Nov. 30, 2010, 10:49 AM | 344,591 | 14

Image: greghartmann on flickr

Case-Shiller's September housing report came out worse than expected, confirming to any doubters that the housing double dip is here.

National home prices dropped 1.5% in September.

The new data will worsen Case-Shiller's already bearish outlook for the housing market. Earlier this month, it forecast a 7.1 percent drop in prices from Q2 '10 to Q2 '11, with price stagnation through Q2 '12.

This is a brutal forecast, which would have wide economic consequences. Five years after the housing peak, markets in Florida, Nevada and California would remain down around 60 percent.

Big Sky Residential Real Estate – Sales to Price Ratio Widens Sign of Bottom

Stan Feagler — Thu, 23 Dec 2010 20:08:00 GMT

Big Sky – Gap of Sales Price to Original Listing Widens

As we close our books for real estate sales in 2010, the gap between original list price and actual sell price widened. Actual sell prices in Big Sky were 79% of original list, compared with 87% last year and 92% the year before. Traditionally, the gap has ranged 5% - 10% but has grown recently as market prices have fallen and seller have had to deeply discount to sell. And it’s clear sellers want to make deals. The number of transactions is expected to increase by 50% over last year while the average sales price continues to fall.

Average sales price is expected to be $482k in 2010, down 17% from last year. With buyers and sellers meeting on price, it is likely a bottom has been reached for most types of real estate. Less expensive condos and townhomes moved briskly and the luxury mountain home markets is reviving as well.

Total real estate sales in Big Sky are expected to be $62 million* in 2010 on properties with original list prices of $79 million. The chart below highlights the trend in Sales Price as Percent of Listing for residential real estate in Big Sky and the Gallatin Canyon.

When taken in conjunction with the fact that transactions are up 50% over last year, it seems the market is putting in a bottom at current prices.

Period	Sales #	List Price	Sale Price	As % of List
2005	158	$90,808,000	$85,891,000	95%
2006	144	$131,239,000	$124,628,000	95%
2007	118	$130,217,880	$120,655,980	93%
2008	89	$99,814,000	$92,236,000	92%
2009	93	$61,842,000	$53,789,000	87%
2010	139	$78,537,000	$61,719,000	79%

Stan Feagler

Owner PureWest - Christie's Great Estates

Bozeman and Big Sky, Montana

CHART OF THE DAY: Don't Look Now, but We're REALLY Close To A Deflationary Relapse

Stan Feagler — Tue, 21 Dec 2010 16:42:00 GMT

It's hard to argue with the Deflationary chart below when Case-Shiller Index of home prices continues to fall. The same macro trend has been at work in Big Sky Montana since Q4 2008. While sales of luxury Mountain Homes in Moonlight Basin and the other Big Sky Luxury Resorts remained robust in 2007 - 2007, sales of condos, lots and mountain homes alike fell off the cliff in 2009.

The chart below highlights average selling prices, based on MLS data for 2010 sales and pendings thru yearend.

Average Sales Price (Big Sky and Gallatin Canyon North and South)

2005 $543,600

2006 $865,800

2007 $1,022,500

2008 $1,036,000

2009 $578,385

2010 $482,000

When looking at the quarterly data, one can be more optimistic as the price declines show stability in the second half or 2010. As a ski and resort community, Big Sky real estate is at the end of the whip. Real estate price movements are exaggerated on both the up and down side. Second homes are a discretionary item whose price is not based on the same drives as single family homes. The hope is then that the bottom has been reached earlier than the single family market, having fallen faster and harder.

The chart below shows average selling prices for residential real estate in Big Sky and the Gallatin Canyon.

Q1 2007 $1,069,000

Q2 $1,119,000

Q3 $1,020,500

Q4 $895,000

Q1 2008 $1,023,000

Q2 $887,000

Q3 $1,102,000

Q4 $1,238,600

Q1 2009 $629,230

Q2 $668,343

Q3 $551,621

Q4 $520,000

Q1 2010 $501,500

Q2 $460,000

Q3 $488,000

Q4 $481,000

CHART OF THE DAY: Don't Look Now, But We're REALLY Close To A Deflationary Relapse

This morning the government reported that core-CPI -- which excludes food and energy -- rose 0.1%, suggesting perhaps a move away from the deflationary brink.

But really it was all energy that pushed prices higher, and energy has a lot to do with what's happening in Asia, and not necessarily reflective of the domestic situation.

Take that out, and keep in food, and this is what you get.

Bank Closures Expected to Peak in 2010 but the Real Estate Lending Moratorium will Stay With Us

Stan Feagler — Tue, 21 Dec 2010 04:15:00 GMT

Bank closures are expected to peak in 2010 after reaching 140 in 2009. The majority of bank closures involve banks of less than $1.0 Billion in assets, in other words the community banks that often are the lifeblood of local real estate.

The Fed is now attempting to shore up these banks by keeping interest rates low and lending them funds for virtually interest free allowing them to earn maximum spreads on their loan portfolios. Many of these troubled banks can't sell real estate and have no access to capital so earnings are their only way to boost capital.

In many cases, these same banks are under FDIC instructions to increase capital, improve liquidity and lower real estate exposure making new loan funds for real estate purchases extinct. Many community banks are in various stages of working with troubled developers and foreclosures are in progress. As such, much of this developed real estate in the portfolio's of banks has not come to market. Vulture real estate funds are available and transactions are beginning to occur.

In Big Sky Montana, Cross Harbor Capital purchased Yellowstone Club and installed Discovery Land as manager. Sales of developer lots are now robust and the future of the club on solid footing.

Sales of real estate in the other two luxury Big Sky projects, Spanish Peaks and Moonlight Basin are recovering as well but the percentage of cash buyers has more than doubled to in excess of 40% as bank funding for new purchases of second homes has dried up. The increase in sales activity should ultimately help struggling banks to sell real estate they have taken in foreclosure. Community banks often hold loans for second homes on their balance sheet so the sooner the small community banks can recover, the more quickly loan funds for recreational real estate and second homes will become available again.

Many of the high dollar real estate transactions in Montana involve recreational real estate, either in the form of scenic ranch land, lake shore properties near Kalispel or ski properties in Big Sky. Historically these sales have been facilitated by the easy availability of credit. More recently, cash buyers taking advantage of lower prices have become active buyers.

With bank closures still increasing, this is likely to be a protracted process.

For more information, see Reuters article:

U.S. closes six banks; 2010 failures now 157

Stan Feagler

PureWest Christie's Great Estates

Average Big Sky Residential Sales Price Shows Decline in 2010

Stan Feagler — Mon, 20 Dec 2010 03:12:00 GMT

Average Big Sky Sales Price Shows Declines in 2010

The average selling price or residential real estate dropped to a six year low in Big Sky for 2010* Average selling price topped $1.0 million in 2006 and 2007 as luxury mountain homes in Moonlight Basin and Spanish Peaks moved swiftly. The lower end of the market has seen the most activity recently as buyers are comfortable betting on the bottom when less capital is at risk. The high end of the market is still slow but properties are moving at when priced aggressively.

The number of transactions was 139, about 50% over last year and closing on the 2005 peak of 158. Agents at PureWest Christie’s Great Estates attribute the decline in the averages to both falling prices on existing properties and also a higher weighting of less expensive condos and townhomes.

The rule of thumb for all types of real estate in Big Sky is a decline of 50% to 55% from the peak in 2008. The graph below shows the average sales price by quarter since 2005. The peak of over $1.2 million was reached in Q4 2008 when sales of luxury ski-in ski-out properties in upscale developments such as Moonlight Basin and Spanish Peaks were selling developer lots at record prices. At that time, home resale prices were also peaking.

What Do Rising Interest Rates Mean for the Economy?

Stan Feagler — Tue, 14 Dec 2010 00:32:00 GMT

Clearly the rising interest rates in the long end of the curve will have an impact on mortgage rates, and in fact already are doing so. With interest rates rising in the face of the Fed's QE2 efforts, the Fed is losing it's hold over interest rates and investors are saying they see rising rates in the future.

With this much move over the past month, the trend is going higher and while the conventional wisdom is to not "fight the Fed", it seems that now may be a good time to lock in rates.

While the percentage of cash buyers in Big Sky and Bozeman, especially for luxury real estate has increased dramatically over the past two years, interest rates do matter, even in resort properties. Jumbo mortgages are starting to free up but money for second homes remains extremely tight. Althought most purchasers are cash buyers, many of them leverage some other area of their portfolio to raise the cash. With interest rates rising, they will be less inclined to do so.

The counterbalance to this trend is that investors will no longer see as big a return in paying down mortgage debt as the gap on what you can earn on a cash stash and your existing mortgage narrows. While it is difficult to know the implicatons for second home real estate, the past has shown that investors seek real estate investments when bonds and stocks fall, as they will if interest rates rise.

Stan Feagler

PureWest Christie's Great Estates

Article from Yahoo Finance

In theory, bond investors are supposed to keep the behavior of governments and consumers in check by passing judgment on a nation's fiscal health. If things look bad, they sell, pushing up interest rates, and forcing policymakers and consumers to change course. From the outset of the financial crisis, critics warned that the combination of higher deficits (thanks to increased spending and collapsing tax revenues) and the Fed's easy money policies would ignite inflation, and act as a clarion call to the bond vigilantes.

But for two years, the bond vigilantes seemed to remain in hiding, as interest rates on U.S. government bonds generally fell, and then fell again. But in the past month, after laying waste to Greece and Ireland, the bond vigilantes have finally hit America's shores. In recent weeks, investors fearful about America's long-term financial future have pushed up the interest rate on the 10-year and 30-year bond. The yield on the 10-year bond has risen from 2.48 percent on November 4 to about 3.3 percent today -- an increase of 33 percent. Rates on other government debt have also drifted upward. SmartMoney.com's living yield curve provides an excellent month-by-month graphic on how interest rates move over time.

The swift movement raises several questions for consumers, borrowers, and policymakers.
tax revenues) and the Fed's easy money policies would ignite inflation, and act as a clarion call to the bond vigilantes.

See more of article: http://finance.yahoo.com/tech-ticker/what-do-rising-interest-rates-mean-for-the-economy-535713.html?tickers=