Montana banks, real estate may see some effect from crisis

By Jan Falstad - 10/07/2008

BILLINGS — Monday was another record-setting sell-off on Wall Street, with the Dow Jones Industrials dropping below 10,000 and four European countries pledging to guarantee bank accounts.

Meanwhile, nervous investors are wondering when the core of this financial crisis — housing — will recover.

After months of saying that national media coverage of the mortgage meltdown was unfairly hurting Montana, long-time Billings Realtor Marilyn Floberg has changed her mind.

"What is happening on the West Coast is beginning to affect us here in our real estate market. I thought it wouldn't hit here or would be over before it affected us, but I didn't anticipate how deep this would spread," Floberg said.

Unlike California, Florida, Nevada and the Midwest Rust Belt states that have seen dramatic drops in home prices, the average home price in the Billings area actually rose 1 percent to $202,404 in August, the latest figures available from the Multiple Listing Service.

That growth, however modest, is in sharp contrast to a 16 percent decline in July for homes in the 20 largest U.S. cities. That is the biggest drop in 21 years as measured by the S&P/Case-Shiller index.

However, even in states like Montana and Wyoming with conservative lending practices, the national housing crisis is slowing home sales here and tightening credit.

Traffic at Billings open houses over recent weekends was good, but the buyers were scarce.

"Everyone is really concerned about the mortgage and credit crunch and the job market. They are not about to make big decisions about buying into a house or a car until they get this instability straightened out," Floberg said.

Another local real estate agent said buyers are almost required to have a pre-approved loan.

"With gas so high, it doesn't pay to drive around unless they have a letter from their bank saying they are pre-qualified," said Realtor Charlie Hamwey.

So far this year, 1,441 homes have sold in the Billings market, which is 18 percent fewer than this time last year. And while home values are mostly stable, residential sales this year have totaled $2.88 million, a 17 percent drop from the same period last year.

Another indication of a slowing housing market is a 38 percent drop in building permits for single-family homes for the second quarter of 2008. Multifamily building permits were down a whopping 69 percent.