Secondary river markets such as that located along the Yellowstone River between Billings and Mile City, as well as northern water markets are continuing to exhibit expanded market value appreciation relative to outlying areas.

The speculative development market associated with larger tracts being 100 to 300 acres in size in and around primary cities has also softened over the past six to twelve months, as have lot sales and house sales. While this area of the market is not strongly studied by Norman C Wheeler & Associates on a regular basis, brokers and other professionals active in that market report limited sale activity, despite decreasing listing and sale values. We have seen a few instances of sales which would suggest that the market has not moved upwards relative to appreciation over the last twelve months or in fact may have decreased in some areas relative to the fringe or marginal properties, but as noted above, it appears that the high amenity, high quality properties are continuing to reflect demand and premium value within the market subject to historic price levels.

Many of the over priced listing which were referenced in the 2006 land report have begun to reflect adjusted sale prices with many listings moving down 20% to 40% in asking price over the past six months. In many instances, even these reductions do not place the properties in to what would be considered to be the probable market value, but as indicated, as the downward movement on listings occurs, and upward movement continues to occur in the market relative to demand, it appears that the gap is closing between these entities. In the second half of 2007 we anticipate good market activity for the recreational market.

As with the market in 2004, 2005, and 2006, we continue to see sales which are exhibiting new or historic highs in the transitional areas of eastern and central Montana. It appears that there has been a strong shift in value to these areas. On must remember that historically high values within these areas often represent prices which are substantially below the primary recreation markets of south and western Montana.

Thank you for your interest -- Clark Wheeler

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