The Missoula real estate market ended the year with a total of 968 residential home sales for the twelve months ended December 31, 2013. Despite the seasonal decline in sales over the last few months, Missoula’s residential real estate market finished the year about 15.9 percent ahead of last year on a year-to-date basis. At the end of December there were 313 active residential homes listed for sale in the Missoula market, which is a 13.1 percent decrease compared to last month and a 5.2 percent compared to the same month last year. Average lender rates for mortgages have been increasing steadily and, if rates continue to rise, we anticipate it having a downward pull on affordability for buyers in the market for a new home. There were 49 closed sales for the month and 76 homes under contract at the end of December.
Buyer Recommendation: Take advantage of interest rates before they rise and be prepared to pay 97-98 percent of asking price, on average. With lower-than-normal inventory, sellers whose homes are competitively priced have been entertaining multiple offers and getting very close to asking price or more than 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 and make an offer on the good homes immediately to avoid possible multiple offer situations.
Seller Recommendation: With inventory at such low levels for the last several months, 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 because supply is not quite meeting demand. However, while it seems that average sold prices could increase a little during this time, it is still very important to price your home reasonably and competitively.
Supply & Demand: The inventory of homes decreased to 313 active homes on the market at the end of December. This reflects the lowest inventory at the end of any given month in the last three years. Listing activity typically begins to decrease after school begins and the cold weather sets in. The Missoula market realized 49 residential sales this December.
Compared to last month and the same month last year, December under contract numbers were down as the month closed out. Average sold price for the month was approximately $238,880, and sellers averaged approximately 97 percent of asking price.
Price Range: Overall, approximately 25.8 percent of inventory turned over this month, compared to 22.4 percent last month and 20.4 percent in October. Most of the activity (roughly 92 percent) occurred in the under $350,000 price range.
Days on Market (DOM): This December, homes had been on the market for an average of 146 days before being sold, not including relisting. (It is important to note that the average DOM figure is slightly skewed because each time a property is relisted, the DOM resets to zero.)
Foreclosure/Bank Owned (REO): Short sale and REO properties accounted for approximately 4 percent of the active residential listings again this month. At the end of December, the MLS was reporting 8 active short sales and 6 bank-owned properties out of a total of 313 single-family listings.
Average Sold Price: Average sold price in December was $238,880. While this figure has been decreasing slightly each month since June, overall average sold price for the year has trended higher in 2013 than in the last two years. Average sold price for 2013 was $256,739 versus $253,150 in 2012 and $245,017 in 2011.
Absorption Rate: The health of any real estate market can be 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.
Overall, the Missoula market continues to perform quite a bit better than a normal market with an absorption rate of 4.9 months in December. The introduction of more homes for sale in the market would increase the absorption rate slightly and move it toward a more normal market. However, if inventory levels remain low we don’t anticipate seeing the absorption rate increase unless there is a significant decline in sales.
For the purposes of the following two graphs, we are utilizing a 3-month average for sales, rather than 12 months, in an effort to demonstrate the current, short-term absorption rate.
Inventory of Homes Listed for Sale: Over the last year Missoula has had a shortage of homes on the market. Even with the increase in inventory over the summer, inventory levels have remained below that of the last three years. At the end of December there were 313 homes listed for sale, representing the lowest number of homes listed for sale in in any given month in the last three years.
The following chart presents the total inventory of homes listed for sale at the end of each month since January 2010.
Overall Market 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.
Inventory and absorption rates are 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.