Demand for rural real estate has soared during the pandemic, pushing up housing prices in many places in Wyoming.
This raises the question of whether the state is experiencing or might soon be in a housing bubble.
Probably not, experts told the Wyoming Business Report.
Last month, the Federal Reserve Bank of Dallas reported signs that may indicate a housing bubble is forming. That is what happens when demand for real estate outpaces supply, driving up costs.
“This self-fulfilling mechanism leads to price growth that may become exponential (or explosive), resulting in the housing market becoming progressively misaligned from fundamentals until investors become cautious, policymakers intervene, the flow of money into housing dries up, and a housing correction or even a bust occurs,” the report said.
If a bubble bursts because of an economic downturn, rising interest rates or a sudden decrease in demand, some homeowners may find themselves unable to afford their property or owing more money than the property is worth.
Sheri Fluellen is both a licensed Realtor and the director of the Cheyenne Real Estate Investing Association. She said these dual roles give her a unique perspective when considering real estate trends in her local area.
“I use two lenses,” she said.
To put rumors to rest, it seems most likely the Great Recession from more than a decade ago is not going to repeat itself.
“A lot of people say another 2008, 2009, 2010 (is) happening. The way our market is reacting now is for very different reasons that what happened in 2008,” Fluellen explained. “That was the result of banks making stupid loans to people that couldn’t afford it. That was the issue then. It was a lending issue. We don’t have a lending issue now.”
When considering whether circumstances are present to suggest the formation of a housing bubble, Fluellen said Wyoming does share many similarities with the rest of the country.
Rising prices
“What we have seen in Wyoming over the last couple years is certainly similar to what the rest of the nation is experiencing as far as price increases and appreciation,” Fluellen said, adding that the average list price for a home in Laramie County has increased 34% since 2018, according to recent MLS statistics. For the Casper area, that amount is approximately 28%. While those numbers are significant, they aren’t as high as in other areas of the U.S.
“So, we have a similar trend, but it’s not as dramatic as some other areas in the country,” she said.
Much of the perceived demand for rural real estate was driven by the pandemic. A subset of city dwellers moved away from metropolitan areas in hopes of increasing their personal safety or avoiding restrictive social policies, like mask mandates or so-called vaccine passports.
“We were getting people from the West Coast moving here, or if they are a little more liberal in their beliefs, they moved to Colorado,” Fluellen said. “Coloradans that are more conservative moved to Wyoming. It seems like folks that have a conservative political bent are wanting to come here for that reason. We have a lot of space, and they don’t want to be bothered.”
The effect of the exodus from the cities was that Wyoming locals suddenly felt a pinch in their housing market.
“I have heard a lot of people say it feels like there are fewer houses on the market. I pulled the stats off the MLS in Laramie County, and in 2018, there were 2,223 listings. Last year, there were 2,500, so the number of listings are not decreasing,” Fluellen said. “There is more competition for each listing out there, so it feels like fewer listings.”
The increased competition for properties raises the chances for bidding wars over a property that constitutes a middle-class home.
“The unfortunate thing for Wyoming residents is out-of-state folks have sold property in California, capitalized on the incredible amount of appreciating on their home, and they’re coming here with a fat wad of cash. They can pay more. Not only do they have more cash, but their perception is it’s a good deal because it’s a lot cheaper than what they would have gotten in the places they came from,” Fluellen said.
Century 21 broker and owner Bruce Garber in Sheridan said he has seen competition for middle-class home purchases become more competitive to an unprecedented degree. He said the average number of days a property spends on the market in Sheridan County is 32, and functional and well-maintained homes under $400,000 are sure to sell even faster.
“You can certainly tell it’s a seller’s market,” Garber said, indicating that offers on homes are continually becoming more creative in order to stand out among the probability that the seller will be considering multiple offers. Buyers might be more flexible with closing dates, attaching a letter of loan pre-approval to the offer, or paying larger-than-usual amounts of earnest money. It’s even tempting to some buyers to waive a pre-purchase inspection, though Garber strongly discourages going that far.
“It’s not like it was in a normal market,” Garber said. “It’s not guaranteed the seller will make repairs or lower the price.”
Home values
From an investment perspective, the focus changes when it comes to housing transactions.
“With an investor, there’s a different mindset. You want to buy property that will generate an income, and it’s more about potential income. You’re not just looking at the housing market, but the renting market or whatever industry the property is in,” Fluellen said, adding that rental rates have also gone up, though not to the degree that housing sales prices have.
zAmong communities around the state, the housing market has been largely reactive to localized economic forces. Some areas where the local economy centers heavily on one industry experienced different developments in the past year.
“When I think about how different communities around the state are impacted differently, I think we need to take into account the large job losses seen in Wyoming’s mining sector (including oil and gas),” said Wyoming Department of Workforce Services Senior Economist David Bullard. He added that between first quarter of 2020 and third quarter in 2021, the mining sector, which includes oil and gas, lost 4,819 jobs. Those job losses were concentrated in certain parts of the state. The largest job losses occurred in Campbell, Natrona and Sweetwater counties.
“Holding all else equal, fewer mining jobs in a given community means less demand for housing. In other words, if some of the laid-off energy workers left the community, then there would be more housing available for new residents to move in from other states,” Bullard said. “On the other hand, in areas of the state with few mining jobs, such as Teton County, or Sheridan County, there were no significant mining job losses, so an influx of new residents might be expected to cause a large shift in the demand for housing and larger housing price increases.
“I expect that areas of the state that have seen large job losses in the mining sector (including oil and gas) would have more modest increases in housing prices, while areas of the state that have been unaffected by the downturn in mining would have larger increases in housing prices,” Bullard said.
