By EVA DUNN-FROEBIG for the Missoula Organization of Realtors
Low inventory, higher interest rates and a harsh winter have contributed to fewer home sales and a higher median sold price in Missoula this year compared to last year. During the first three quarters of 2014, 836 homes sold at the median sold price of $227,000 compared to 947 homes sold at the median sold price of $215,000 during the same time period in 2013, according to the Missoula Organization of REALTORS® Multiple Listing Service.
Although sales numbers in 2014 are lower compared to last year, they are higher compared to the first nine months of 2012 and 2011, revealing slow and steady growth in Missoula’s real estate market. “Comparing 2014 to 2013 in Missoula is somewhat unfair,” says Brint Wahlberg, President of the Missoula Organization of REALTORS®. “Interest rates are nearly 1 percent higher, supply of active listings is even tighter than last year, and we had a very cold and snowy winter that delayed buyer and seller activity.”
The current absorption rate—or the time it will take to work through the current inventory—is six months and just four months for homes $250,000 and under. A healthy market has an absorption rate of between three and nine months. “The lack of available supply in affordable price ranges has prevented the pace of sales in 2014,” Wahlberg says. “Potential sellers should consider talking to a Realtor about putting their home on the market now rather than waiting. The ‘busy time’ isn’t over and many neighborhoods and price ranges are short on supply.”
It’s likely that the low supply of homes on the market has also caused the median sold price to increase. Low inventory allows sellers to increase their asking price and sometimes causes buyers to become competitive, especially for homes in lower price ranges and in desirable neighborhoods.
Rising Interest Rates
Interest rates in 2013 were at record lows, making the incentive to buy greater. Buyers also hurried to purchase homes or refinance in 2013 to get the lowest rates they’ll probably ever see, causing an explosion of activity in March, April and May 2013. “Interest rates being .75 to 1 percent higher than last year has forced some buyers to lower expectations and others to quit looking entirely,” Wahlberg says.
The cold and snowy winter stunted 2014 sales early. While Missoulians were inside staying warm or on the slopes skiing, fewer homes went on the market and fewer prospective buyers were out looking at homes. In contrast, June, July, August and September 2014 (518 sales) were on pace with the same four months in 2013 (521 sales). In fact, 2014 has been steadily catching up to last year. At the end of the first quarter, 2014 was 25 percent off pace of last year; the second quarter was 16 percent behind and the third quarter ended at 11 percent off pace.
The market is looking up compared to the previous two years, but it will only continue to do so if there’s more inventory, especially in affordable price ranges, according to Wahlberg.
“The positives for 2014 are that it’s showing continued long-term growth in sales volume and median sales prices as we get further away from the real estate bubble,” Wahlberg says. “Supply will affect us the most moving forward. If limited amounts of available listings in affordable price ranges is the continued trend, sales volume will remain stunted.”
Click here for more market statistics from the Missoula Organization of REALTORS®. The Missoula Organization of REALTORS® is a trade association dedicated to providing valuable programs, products and services to members, to affiliate members and the community. Find out more at The Missoula Organization of Realtors’ website.
Eva Dunn-Froebig is an active member of the community and the Communications Director at the Missoula Organization of Realtors. She has worked and volunteered for several membership organizations during her 15 years in Missoula, including Run Wild Missoula, the Missoula Art Museum and La Leche League of Missoula.