September 29, 2006

If there's a housing bubble in Billings, MT, you know something is realllllly wrong

Take Billings off of my "geo-arbitrage" list...

24 comments:

john_law_the_II said...

I totally disagree. a boom, or bubble, is just rising prices and overinvestment. it can happen anywhere. it's not a sign, it's just part of a larger trend. if you look at charts of housing prices, my guess is just about every market sees the same cycle at about the same time.

Joe Logic said...

You present an interesting point - that the housing bubble is everywhere. Even places where prices haven't climbed much like Detroit and aging industrial cities in Ohio, etc, if there were no current lending bubble, those places would've probably dropped in price. That's why it's no surprise that those places are experiencing the bigger declines right now.

We've been planning our geo-arbitrage for a while, but we concluded that renting is the best bet no matter where we go. The cheapest places are just gonna get cheaper.

PS I can't believe I just watched that whole thing, through the cheesy Home Alone soundtrack and Moby music and all.

Amarulaman said...

I liked it...now thats effort! Inspires me to create a similar documentary on my area...just outside of Vancouver, B.C.

Bubble central..In CDN dollars!

Anonymous said...

"PS I can't believe I just watched that whole thing, through the cheesy Home Alone soundtrack and Moby music and all. "

C'mon, Joe! The guy is not dealing with 20th Century Fox budget. And he does not have to in order to have an effective presentation. When I saw the length, I did not think I would watch the who thing either, but I did because it kept me INTERESTED and it was INFORMATIVE. And that is what makes a great presentation. Try getting something like this from the mainstream media.

Metroplexual said...

It is a lending bubble, which makes it national. My sister-in-law just bought a 7000 sq ft McMasion last year in Billings. She had a hell of a time selling her old house off of Poly which she bought in 1995 at the low end of the cycle. All the new construction has created a glut.

Anonymous said...

Yeah, but the bright side of the Canadian bubble is that it's mostly Vancouver/Victoria and Calgary. The vast majority of the country is still affordable and from what I've gathered, the Toronto to Ottawa band still has a lot of cheap and affordable units especially if you avoid those fancy high rise type of investment properties.

Tom DC/VA said...
This comment has been removed by a blog administrator.
speedingpullet said...

Kudos to Doug making a great, informative piece!

In years to come, it will be shown in History and Economics lessons, as an example of the insanity of the Early 21st Century....

..and for the critics.....make you own piece and show us your point of view!

I for one would be very interested in seeing pieces on other places, with different spins..

Anonymous said...

This is funny timing. I got an email from my ex-girlfriend (circa '03) that her and her husband just bought a house in Billings. The kicker is that his government job almost certainly requires a move to a different office around the country to gain on the GS schedule. I don't hold any ill-will towards her, so I hope it turns out ok, but I'm guessing that they will have to take a loss at some point to get out of that city.

Metroplexual said...

Doug nailed it. My sister-in-law described alot of it the same way, only she thinks because she bought big and expensive that she is immune. We shall see.....

Anonymous said...

"I don't hold any ill-will towards her, so I hope it turns out ok"

You're a guttless whimp.

john_law_the_II said...

that video about billings is fantastic, by the way.

encino_man said...

I'm with anon 10:33--didn't think I'd sit at my desk and watch a 20 min. video but hung in there the whole way. Nice job Doug!

Osman said...

I thought the video was great and posted it to my blog today too. Doug could spend a little more time on the counter arguements but overall it was very well done.

Here's a counter point.

Should house prices always track inflation? The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. It's often called a broad measure of inflation.

What's in that basket? A variety of costs for food, rent, apparel, transportation, medical care, recreation, education and communication, and a bunch of other goods and services.

What does the cost of food and clothing have to do with housing? Not much, in my opinion. Especially at the local level.

Remember, CPI isn't a measure of supply and demand. Assuming that house prices in a particular market should track CPI is wrong because it assumes no local changes in demand or supply of housing over time. It's those fundamentals that are a bigger determinant of prices, not the unrelated cost of my sneakers.

Yes, it's often said that house prices track inflation (usually beating it by ~2%). But that's at a broad level. When you drill down to local markets, the real determinants of pricing are the factors that drive local supply and demand.

By the way, I think one the most interesting (and self sustaining) demand factors for our region is the talent clustering effect that Denver/Boulder enjoys because of its educational opportunities and exceptionally high quality of life. For more info on talent clustering, read "Where the Brains Are", by Richard Florida in the October issue of Atlantic Monthly. You'll see how Colorado is a net beneficiary of talent and capital.

Metroplexual said...

Osman,

Richard Florida is a hack. He lifted his idea for "creative class" from Claude Fischer. If you want to see the real creative class check out the nerds in Silicon Valley.

I have not read the Atlantic article yet but really, you have to take Florida's work with agrain of salt. He is great at selling an idea, but his academic skills are questionable.

Patch Tuesday said...

That really is a good video. It made me want to run out and do the same thing for my bubble region.

Joe Logic said...

Like I said I watched the whole thing but I was confused with the whole background music seguaying from Home Alone to Moby. I would have preferred something like Star Wars music, maybe Imperial March as they show the construction and overbuilding, and maybe some dreary Yoda theme on all the "for rent" signs... LOL Anyway take my post with some humor, and BTW last I checked CDs and royalty fees to ASCAP all cost about the same regardless of music.

Disgorge! said...

A very informative vignette that serves as a cautionary tale to those thinking of buying any RE anywhere at all in the entire world. Now is clearly not the time!

Anonymous said...

As for the comment about accessibility to Yellowstone, it is 4 hours away by Montanabahn. It is far away and Billings is pretty ugly for Montana. The nicest feature of the town is adrab cliff wall with an airport. The refineries are in town on the south side. To tell the truth soe parts of Billings looks Like Newark NJ.

Anonymous said...

That Doug fellow has a soothing voice.
The vid was solid. Only thing missing was how much house you can reasonably expect afford on $41k - not what they're asking, that's for sure! One or two soundbites from priced-out regular folks would have rounded the storytelling.

Anonymous said...

I have been reading almost everyday since Sep of last year. I sold my home in CA in Feb06. I listed it for 30K LESS than my realtor wanted to and luckly sold within weeks. This video is one of the best housing clips I have seen. This is so much better than a graph -- for laymen. Few of you have been to MT. It might be cheaper for you to fly to Paris than to MT. My knowledge of MT is a waste of your reading time. But a few simple facts: MT educates the young and ships them to other states in the NW b/c they can't attract business. My extend family has a large business in the region and the tax laws do not compare with the offers of South Carolina and Lee County, Florida. Sorry to "dribble" in a rookie post, but this video got me. If Billings falls, so does MT. Did you know that MT has less than 1 million people? It has one area code. that is funny. thanks for the blog
wide_right
North Bay, CA

Chris G said...

I give Doug an "A" for effort and wondered if other people could do the same in their own modest cities. Good job providing the "ground truth" for Billings.

It also helped me realize that if I take a vacation to Montana, I won't be pulling over in Billings.

Tango in Uniform said...

Thanks for the comments, everyone.

Oh, about the music. I kind of got stuck on the idea of using "Home Alone" because the main theme is called "Somewhere in my Memory." Fitting for the bubble, no?

After I finished the video, I did think it was kind of cheesy and weird, especially the transition to Moby. But it was late and I didn't want to spend hours fitting in the perfect music. Oh, well.

Just curious, Chris, what makes you not want to stop in Billings now? The fact that parts of it look like a dry wasteland? Maybe I'll get sued by the Chamber of Commerce for driving away business!

metro-- the expensive end is in the deepest trouble, IMHO.

one of the anons-- You're right about showing how much you should buy for the median salary. Maybe I'll do that in a future update video

other anon-- You're right that I don't have a budget (period). This video was made with a cheap Canon digital camera, old laptop, and free Windows Movie Maker. Anyone can do photojournalism these days, as evidenced by me. Now with the free video hosting services for distribution, there's no excuse.

Anonymous said...

did all the cows get their own barns to, price a steak