It’s summer! Interest rates are averaging over 6%! One thing that everyone knows about Montana weather is that if you don’t like what is happening, just give it 5 minutes. Well, if you didn’t like what the real estate market has been doing for the last 2 years here is your chance for something different.
On the ground I can tell you that I feel the shift. Last year in Ravalli County for 5 months homes averaged less than 20 days on the market before going under contract, and in May of 2022 that number has shifted to 31 days. A few months ago there would only be a handful of price reductions per week, and now I’m seeing almost 1 price reduction per 2 new homes listed. The fed is raising interest rates to cool inflation, and housing cost inflation has been rampant in the last few years. 23% annual increases in median home prices is not sustainable. Home prices are adjusting accordingly.
For people trying to buy real estate, the good news is that sellers don’t get to just have their way with you. Where there used to be 15-20 offers, there may only be 3 or 4. Or only 1 offer. Or the price gets reduced because they only had 2 showings the first week. Sure, there are still unicorns that are priced to generate lots of interest, but be on the look out for opportunity. With less competition, you are more likely to get an offer accepted with an inspection, at asking price, or even for under asking price again. Sellers are also more motivated to offer concessions if something comes up during inspections. The downside for buyers right now is that money is more expensive to borrow, and anyone that got pre approved 2 months ago needs to talk to their lender to find out what they can qualify for today. Buyers also need to be prepared to pull down payment money out of the stock market or money market accounts well before closing so they don’t find themselves coming up short when closing arrives.
For people thinking about selling, answering the question, “but where will I go?” got a little easier. With less competition it is easier to get under contract for the next home contingent on the sale of you existing home. We are at the top of the market, and you can still get a great price for you home. It’s just less likely that you will get the $50k over asking or a big bidding war. If you are selling you also don’t have to feel like you are leaving money on the table if you could wait to sell in 6 months. The downside for sellers is that they may have to do the updates to the flooring or walls to make the house move-in ready. Homes may not go under contract within 5 days of listing. Sellers are going to have to be more patient, and more flexible.
It’s not time to freak out or panic. For most of the last 100 years, interest rates have been over 5%. People still need somewhere to live, Western Montana is still a great place, and remote work is going to continue to be available for a certain percentage of the workforce. If you are trying to buy or sell it is important to stay current with the latest numbers and trends and to be ready to adapt as the market conditions change.
Now for the May numbers!
New listings were at their highest monthly total for the last 2.5 years last month. There were 136 new listings to 65 closed sales, so twice as many listings as closings. It is listings season here, but that is still a substantial jump over anything we have seen in a while. Median home prices year to day are still up 24%. I would expect to see the growth in sales prices we have seen in the past two years start to taper off.
If you’d like more information about your neighborhood, feel free to reach out to me at firstname.lastname@example.org and I’ll be happy to answer any questions you might have!