July 22, 2021
New Orleans
I’ve spent a fair amount of time in Billings, Montana over my lifetime. I can say the same for Rapid City, South Dakota, though it has been a couple of years. Same for Waco, where I just had a cousin graduate from Baylor. I’m not unfamiliar with Coeur d’Alene, Idaho, Fort Wayne, Indiana, Johnson City, Tennessee, and Huntsville, Alabama. Nonetheless, if anyone had ever told me that any of these seven cities would have been in the top ten of a list of “emerging housing markets” in the US with Billings at number one, I would have said, “Really? Get outta here!” or words to that affect. But, there they all were in a Wall Street Journal ranking, so what do I know.
The Journal’s Emerging Housing Markets Index looks at “metro areas for home buyers seeking an appreciating housing market and appealing lifestyle amenities.” Waco, Fort Wayne, really? They note that this quarter they added in some other variables which may explain some of this. They looked at the level of real estate taxes, unemployment rates, and rising wages, which pushed some cities from other regions down the list and elevated some of these towns.
Looking at the Billings situation in the catbird seat, they underlined younger professionals looking to move during the pandemic and take advantage of some level of remote work privilege and the delayed dreams of buying a home in larger west and east coast cities. None of that is to say that they are giving away land and property in Billings or anywhere else in Montana. “The average single-family home-sale price in Billings and the surrounding area was $376,248 in June, up 32% from a year earlier, according to the Billings Association of Realtors.”
I can’t help but read these numbers differently. It’s hard to see all this as the trend that the local realtors are hyping. We’re not talking about mass migration when we’re talking about only a couple of hundred houses for sale, like the less than 400 on the market in Billings. It is also a huge and risky bet to believe that remote work is going to be permanent or sustainable for any but a small subset of workers, even techie professionals. Apple didn’t spend more than a billion to build its Silicon Valley campus to put up a vacancy sign. In fact, they are planning on building other mini-campuses else, too. So are many of the others. Amazon’s vaunted second headquarters search wasn’t just public relations.
Meanwhile betting on the other side of the wager from home ownership is a company like Toronto-based Tricon Residential that is putting together five billion including a big swatch from the Teacher Retirement System of Texas, to buy 18,000 single family homes over three years as rentals. The little real estate folks and smaller cities have a vested interest in beating the drum to claim it’s a land rush in their towns. I heard an advertisement for Tulsa on the radio that made it sound like heaven recently to offer another example. The big boys seem to be sensing that the American Dream of home ownership is fading, partly due to the sticker prices rising. For many working families as prices rise, the notion that they might ever own a home near where they are working is fading.
Looking for affordable housing solutions as a mass market problem, home ownership might only be possible, even if costly, in these so-called “emerging” and, often, smaller metros, but worker mobility has not been rising, it’s been falling. Yes, more people are telling their existing jobs to shove it, but they aren’t just packing a trailer and heading for parts unknown. They are staying nearby, and that means that affordable housing means affordable rent. We need to know a lot more about affordable rental markets these days and start having more aggressive programs to match workers and rents, than workers and mortgages, given the continued impact of wage stagnation.