It appears we're seeing more good news that the Missoula residential market is on a steady pace of recovery. Now that the 1st quarter is in the books I looked back at the amount of sales volume, the median sales price, the impact of REO/Foreclosure sales, and the amount of market supply. The data shows pretty good news for the most part, continued volume recovery, fewer REO sales, and about as normal of market supply as one could hope for. This is not without challenges though as we see the median sales prices are down yet again and some segments of supply are still in a stagnant spot.
So lets look at this a little closer.
First off starting with the best news we're seeing, sales volume. For the 1st qtr in Missoula there were 185 residential sales, posting our best first quarter in 6 years! Our numbers surpassed even the 1st qtr of 2008 which was before the bubble really burst in our area and the market recession had not yet hit. What really impresses me is that 2010 represented an "inflated" market which was boosted by the move-up and 1st time home buyer tax credits. 2011, 2012, and 2013 are markets without those incentives, yet we've seen good recovery moving forward. This tells me two things, first of all the housing credits helped save our market from further free-fall in 2010. But more importantly our market has now shown 3 straight years of increased sales activity without a tax-credit incentive to buy.
Next I pulled up the median sales price by quarter. This one suggests some ongoing challenges as we see the median sales price for the 1st qtr has dropped yet again, it was $190,000 in 2013 which represents the lowest 1st qtr median going back before 2007. Now, should we panic? Not yet, and here's why. The last two years, 2011 and 2012 we saw a very slight median increase once the whole year was over, however as this chart shows both of those years started out lower than the year before. This is probably in the "wait and see" department if we should be concerned about further devaluation. Recent history suggests it doesn't, but a continued decreasing median shows us where the sales activity is occurring - but more on that later.
Now what about the impact of REO sales? REO stands for "real estate owned" a somewhat fancy term we Realtors call bank-owned sales. The houses have already been foreclosed upon and are being re-sold in the MLS. The one big thing to take away from this is that this year we've seen a decrease, suggesting we're possibly through the biggest bulk of foreclosure/shadow supply. The Missoula Organization of Realtors just began tracking this in 2010, I don't think there were only 4 REO sales in 2010 as the chart shows, but that's right when this data started to be recorded in our MLS, I'll chalk that lower number up to a lack of infomed data entries.
Finally lets look at supply and demand, my favorite thing to look at when reporting numbers. I report the absorption rate and not the days on market of sold homes. Why? Because DOM (days on market) only reflects sales activity while absorption takes current active listings into account as well. The absorption rate is calculated by taking the amount of current listings on the market (or within a certain price point) and dividing them by the amount of sales in that same segment within the last month. This is something I've been keeping track of for years now.
Recently I've been keeping an excel sheet of absorption rates and I was able to put those together in an excel line graph to show us what is going on in each price point. There's a lot of info in this next chart. It looks back from May of 2012 forward to April of 2013. Furthermore it breaks apart the market by arbitrary price points that MOR has been using since 2009. I added in a dotted line to show you where a "normal supply" market is, which is anywhere between 3 to 9 months worth of market supply.
So what do we see here? What this tells us is that for the greater market priced at or under $275,000 we've seen a nice little stretch where most houses accurately priced within these segments are in a "normal" market. This means that buyers need to be more realistic when writing offers, the days of getting sweet deals in these price ranges are starting to eclipse. Buyers are seeing more competition when writing offers. Likewise sellers are experiencing better conditions, more situations of multiple offers and better offers in general. If you look at the $150,001 - $200,000 range you see it's been flirting with dipping under 3 months of market supply. That would mean it's getting close to being in a seller's market, something we've not seen for any price point since we started tracking this data.
But it's not all rosy with supply here. $275,001 - $350,000 has been steadily climbing into heavy over-supply though the winter and spring and has shown no correction. $350,001 - $425,000 has been volatile, some snapshots suggest improved market health while others do not. It seems very hit and miss in that market. Meanwhile the lagging market, $425,001 and up has been making improvements, but is still in a situation of heavy over-supply. These markets are where the best deals still may be found, when talking in terms of negotiation power and alternate options and supply.
Finally I wanted to take a look at the total market which is not segmented by our price breaks. This chart is fairly dull, if 3-9 months is a normal market the goal would be a 6 month supply market to be in the best equilibrium, and this chart would suggest we're right about there.
To summarize, we're seeing good continued recovery and a market that is in pretty good balance overall in terms of available supply listed and the amount of buyers in the market. Some buyers and sellers are experiencing market conditions that have not been seen for 5 to 6 years, and the amount of foreclosure sales influencing the market has decreased a bit. We're still seeing over-supply and issues of stagnant markets at our top-end of the market and there's the interesting trend to track of an ongoing 1st qtr median sales price decrease.
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