Missoula Real Estate Market Overview
Driven by low inventory and a 22.5 percent increase in year over year sales, Missoula’s real estate market continues to improve. 433 active residential homes for sale in the Missoula market at the end of July accounts for a 24 percent decrease from the same time last year. Residential home sales for both the month of July and YTD July were higher than sales for the same time period since 2008. Under contract figures have remained strong for several months now, despite low inventory.
Buyer Recommendation: Take advantage of low interest rates before they rise and be prepared to pay approximately 98% of asking price on average. With a shortage of inventory, sellers who have their homes competitively priced are sometimes entertaining multiple offers and getting very close to asking price or over asking price. Prior to beginning, or resuming, your search, we recommend that you be prepared with a loan pre-approval letter and ready to look at the good homes immediately to avoid possible multiple offer situations.
Seller Recommendation: Inventory is so low right now that we recommend putting/keeping your home on the market. Buyers currently have limited options, creating the possibility of getting an offer close to asking price now that supply is not quite meeting demand. However, while it seems that average sold prices could increase a little throughout summer it is still very important to price your home reasonably and competitively as the seasonal influx of new listings hit the market in-step with the warmer weather. There has been a seasonal increase in competition which could hold some homes back from selling if they are overpriced. With low inventory, expect more flexibility in home prices for the lower price ranges.
The health of the Missoula real estate market is recorded by absorption rates, which is the correlation between the number of active homes on the market and the number that sell per month, on average. According to the National Association of Realtors, a normal market is six months of inventory.
It is important to note that we have adjusted the way this figure is calculated to more accurately demonstrate the current absorption rate, utilizing a 3-month average for sales, rather than a 12-month average. Overall, the Missoula market is performing quite a bit better than a normal market. At an absorption rate of 4.0 months in July, the Missoula market is continuing the trend of the best absorption rates in five years. If more homes come on the market in August and September, we anticipate seeing the absorption rate deteriorate slightly and move toward a more normal market.
Prior to July 2012, Missoula’s absorption rate performed at a slower rate than that of a normal market but has been performing at a better rate ever since. As the market improves, look for consumer confidence in the higher priced homes to increase as a positive indication of overall market health.
Inventory of Homes Listed for Sale:
Over the last several months Missoula has had a shortage of homes on the market and the trend continued through July. However, inventory has been increasing for seven months straight. And, while we expect inventory levels to increase in August and September, we don’t anticipate seeing the level of active homes to increase to prior year levels.
Outlook: A low absorption rate in your price range may indicate an opportunity to list at a higher price and, conversely, a higher absorption rate in your price range may put downward pressure on your market value. Keep an eye on inventory and absorption rates as an indicator for how fast our market is recovering. If the number of homes coming on the market is proportional to the number sold, our market will continue to strengthen. If there is a substantial increase in homes that are not absorbed by the number of buyers in the market, expect our market to soften until they are absorbed by the buyers.
5-Year Home Sales by Month:
Under Contract volume decreased from 195 properties in June to 155 properties in July and, though we saw sales drop off last winter, home sales throughout the spring and summer months this year have either matched or outpaced most all of the last five years when compared to the same months in prior years.
As anticipated, a large percentage of homes that were under contract in June turned into sales in July. According to the Missoula MLS, 123 homes were sold in July this year, the most number of homes sold during one month in the last five years.
Average List-to-Sales Price:
For several months list-to-sales price has been better than in prior years, hovering between 96 and 97 percent. In May list-to-sales price dropped back down to 96 percent and has moved up slightly to 98 percent in June/July. Inventory levels are still down significantly compared to prior years but when inventory increases, look for average list-to-sales price to decrease due to added competition in the market. A higher list-to-sales price can also be an indicator of increasing home values. Usually, lower list to sales prices in the summer months can be attributed to high absorption rates, primarily because during these months there are more homes on the market, meaning more competition. In that scenario motivated sellers may have to take less for their home in order to beat out the competition.
Information provided by:
Williams & Associates | Keller Williams Realty