In this article, Jeremy Williams from Bannack Real Estate Group takes us through the third quarter Missoula, Montana real estate market report. Being the end of the third quarter heading into the fourth quarter of 2021, many people have been reaching out to us asking what we’d expect to see this winter in the marketplace and what we will be preparing for next year.
Well, usually, we answer that question by going over a couple of KPIs (Key Performance Indicators) that we are watching. That should give us an excellent idea of where we are headed. So, what are the KPIs that we look at? Let’s dive right in!
How Many Homes Have Sold this Year Versus the Previous Years?
Right now, we are just over 1000 homes sold around the Missoula, Montana area, which is actually about 12% lower than it was last year. However, a lot of that has to do with the limited inventory. Out of the 75,000 to 80,000 people living in Missoula, there are only 129 homes for sale in all price ranges. And considering that 30-40 of the homes for sale are over a million dollars when you break that down, there are not many options either way in most price ranges. So, inventory is incredibly low right now. We are definitely watching inventory and how we do that is by looking at another indicator that we call the absorption rate. We will talk more about that in the next section.
The absorption rate is simply how many homes are for sale compared to the number of buyers that are in the marketplace at any given time. So, according to the National Association of Realtors , if you have six months of inventory, meaning; if no other homes come on the market, it takes six months for all those buyers that are in the market to absorb those homes, that’s considered a normal market.
Over six months is considered a buyers’ market. Under six months is considered a sellers’ market. Currently, we are averaging about 1.2 to 2 months of inventory. Essentially, this means that we are still extremely in a seller’s market, and there are very few homes available at any given time. And so, we are going to be watching that over the next year or two and see if it will start creeping up, maybe towards a more normal market.
One of the things that are going to be a key indicator there is that not many developments got subdivided this year. And a lot of that has to do with the process, and to get the final plats allows builders to build new homes. We are going to see a lot newer construction next year. That’s going to help soften the market, not in a bad way, but in a normalizing way for the market to provide the much-needed inventory headed into next year.
Simply what that means is that if you are selling a house or if you want to get into a new house, you will still be able to get a reasonable price for the home you are selling, and you will be able to replace that at a better price. In fact, it will be a little bit easier than it was this year or last year.
List to Sales Price
The other indicator that we will be watching is the List to sales price. Meaning, if we put a home on the market for one price, does it sell for more or less than the price we listed it for. This is the case where we gauge whether buyers would want to keep paying more for the homes or they are pulling back and saying, ‘Hey, homes are getting a little more expensive in this marketplace, and we are not ready to spend that much money for a home.’
Earlier this year, we saw a lot of high. 107% list to sales price. Meaning that if we put up a home for sale at $400,000, we sell it for 7% more on average. Right now, we have witnessed a decline to 102%. That’s normal for this time of the year. Most of these buyers have been looking all year for homes, and will probably resume again next spring. And the houses they looked at in spring were probably a lot less expensive than the same house is coming on the market here in the fall. That’s normal for this time of the year. But we are watching absorption rate and list to sales price as an indication of how the market is moving and if the market is softening.
So, when is the Best Time to Sell Your Home?
A lot of people have been asking this question. The easiest way to answer this is by first asking yourself; are you in the house you’d still want to be in the next 5,10,15 years? Because, as the market changes and prices continue to go up and interest rates come up, it will be really important that we time the sales correctly. So, if you have even thought about it, you can reach out to Bannack Real Estate Group, and we will see the best way forward. You can contact us at (406)926-6767 or text BRE to 59559 for more information.