Welcome to your May 2022 Market Report
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 feel the shift in the Missoula housing market. Last year, for 8 months in a row the average home got under contract within 7 days of being listed in Missoula county, and in May of 2022 that number has shifted to 19 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. This isn’t an accident, it is the point of interest rate increase. Take a look at the median days on market in Missoula County in the chart below.
Good News for Buyers
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 on a median priced home, there may only be 3 or 4 today. Or only 1 offer. Or the price gets reduced because they only had 2 showings the first week. Sure, there are still unicorns that get multiple offers, 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.
Sellers will have to adjust
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 the big bidding war that you have been hearing about. If you are selling, you also don’t have to feel like you are leaving money on the table by waiting 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, especially when negotiating contracts and inspections.
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 up in the Missoula housing market in May by 14% over last year. We saw 222 new listings, and 111 closed sales, so 2x as many listings as closings. Closed sales were down this year compared to last year, but I attribute that to the lack of new listings in February and March of 2022. When average days on market is 65, that means we can only close on what got listed two months ago. The median sales price for residential property in missoula county is up by 25% the first five months of 2022, compared to 2021.
If you want to learn more about what is happening in your neighborhood, please reach out to me at firstname.lastname@example.org
For numbers focusing on Ravalli County look here: https://sashavermel.com/2022/06/24/may-2022-market-report-ravalli-county