The Missoula residential real estate market closed out the first full month of 2014 with a total of 35 sales at an average price of approximately $256,709, with the majority of homes sold priced under $350,000. Homes that closed in January were on the market for approximately 113 days before the sale was finalized. At the end of the month there were 85 homes under contract and 333 homes actively listed for sale.
Supply & Demand The inventory of homes listed for sale in Missoula increased to 333 at the end of January, coupled with 85 homes under contract. The market realized 35 residential sales for the month, the lowest number of sales in any given month since January 2011. While inventory did increase from last month, the Missoula market is still suffering from a lack of inventory. It appears that, despite the gradual increase in mortgage rates, the lack of inventory is helping to keep prices up, with sellers garnering between 96 and 97 percent of asking price.
Price Range: Approximately 15.8 percent of inventory turned over this month, compared to 20.8 percent last month and 20.6 percent in November. Most of the activity (roughly 86 percent) occurred in the under $350,000 price range.
Days on Market (DOM): Homes sold in January were on the market for an average of 113 days, compared to 146 days last month and 121 days in January of last year.
Foreclosure/Bank Owned (REO): Short sale and REO properties accounted for approximately 7 percent of the active residential listings this month. At the end of January, the MLS was reporting 15 active short sales and 9 bank-owned properties out of a total of 333 single-family listings.
Average Sold Price: Average sold price in January was $256,709. This is the highest average sold price in the month of January for the last couple of years. Until this month, average sold price had been declining for several months prior. We believe this increase to be partially attributable to low inventory combined with improved buying power due to low interest rates. However, after a year of increasing average sale prices we do anticipate a levelling out over the next several months as the fed releases its control on the interest rates interest rates begin to rise/fluctuate on their own.
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 residential real estate market continues to perform at or better than a normal market, producing an overall absorption rate of 6.3 months in January, up from 4.8 months in December. This increase is likely attributable to a reduced number of sales in January and a slight increase in inventory. Further, this could also be indicating that the low levels of inventory we have been experiencing for several months may be, in all actuality, the Missoula market’s new “normal”. Buyers are likely doing one of three things: cancelling transactions because they unable to lock in an affordable rate before it rises; waiting for more homes to come on the market (more choices); or, holding off buying at all and staying in their current homes. Whatever it is they are doing, it is clear there are not many buyers putting homes under contract right now. The introduction of more homes for sale in the market would raise the absorption rate further. However, if inventory levels remain low we don’t anticipate seeing the absorption rate increase much further unless there is a continued decline in sales.
Inventory of Homes Listed for Sale:
Over the last year Missoula has had a significant shortage of homes on the market. Even with seasonal increases in inventory, inventory levels have remained below that of the last few years. At the end of January there were 333 homes listed for sale.
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:
Missoula home sales decreased to a total of 35 for the month of January, the lowest number of sales in three years. Under Contract volume increased from 76 properties at the end of December to 85 properties under contract in January. Based on the low number of sales in January, we believe there may have been several properties that were under contract at the end of December that did not end up closing in January.
The following chart provides a monthly snapshot of total homes sold since January 2010. (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 97-98 percent of asking price, on average. With low 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. 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.
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.