Missoula’s September residential real estate market was about 16 percent ahead of last year on a year-to-date basis, despite a decline in sales the last couple of months. At the end of September there were 434 active residential homes listed for sale in the Missoula market, which is a 3.8 percent increase compared to last month, but a 4.5 percent decrease from the same month last year. Despite low inventory levels, under contract figures have remained strong for several months now and, in September, were comparable to last month and the same month last year. Average lender rates for mortgages have been steady over the last several months, however, if they continues to rise, we anticipate it to have a downward pull on affordability for buyers in the market for a new home.
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.
For the purposes of the graph above and the graph below, we are utilizing a 3-month average for sales, rather than 12 months, in an effort to demonstrate the current, short-term absorption rate. Overall, the Missoula market continues to perform quite a bit better than a normal market with an absorption rate of 4.4 months in September. If more homes continue to come on the market as we enter the fall months, we anticipate seeing the absorption rate deteriorate slightly and move toward a more normal market. However, if inventory levels stagnate we don’t anticipate seeing the absorption rate deteriorating unless there is a significant decline in sales. Sales typically taper off after summer, though, based on what we’ve seen so far this year, it is possible residential home sales will remain relatively strong throughout the fall months.
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. The trend changed slightly in September with an increase in inventory of 3.8 percent. We believe this is due, in part, to sellers realizing over the last several months that fewer homes on the market means less competition which, in-turn, translates into the possibility of selling very near or, even above, asking price. We anticipate inventory to remain healthy throughout the next couple of months and are hopeful that the level of active homes will match or surpass prior year levels.
The following chart presents the total inventory of homes listed for sale at the end of each month since January 2010.
5-YEAR HOME SALES BY MONTH:
Under Contract volume decreased from 134 properties in August to 128 properties in September. While sales decreased from last month and the same month last year, September 2013 residential sales were better than in September of 2011, 2010 and 2009. The following chart provides a monthly snapshot of total homes sold since January 2009. (Green columns represent Under Contract properties for the current year.)
Buyer Recommendation: Take advantage of interest rates before they rise and be prepared to pay approximately 97% of asking price, on average. With lower-than-normal 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 and make an offer on the good homes immediately to avoid possible multiple offer situations.
Seller Recommendation: While inventory increased over the last month, inventory is still low enough 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 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. Keep in mind that with the increase in inventory there will likely be a corresponding increase in competition which could hold some homes back from selling if they are overpriced.