It's just beyond halftime in Missoula's real estate market. I wanted to get a quick summary together to take a look at the first 6 months of real estate data in our area so we can look at how things have fared in Missoula, and where it's headed.
Overall the first half has seen a slower pace of sales than the year before. So should we panic? No, I don't think so. The first six months of 2014 had 449 total residential sales, down 76 total sales compared to the 1st half of 2013 which had 525 sales. That's a decrease of about 17%. That's a good sized drop! However, one interesting thing to look at is the pace of sales as we've hiked back up from the "floor" of our market which was 2011. Take a look at this chart that I quickly put together that tracked 1st half sales volume going back to 2011.
Where's the anomaly? It's not really 2014 but 2013 which saw a huge spike. The dotted line on that chart is a linear trend line based upon these 4 years. So we see 2014 is still off pace a bit, but this shows us that using 2013 as a measuring stick for future volume growth isn't the best idea.
So should we freak out? No, certainly not, 2014 shows a continued trend of increased sales, and in June we saw more sales in 2014 than we did in 2013. It would seem this year's market is more of a similar reflection of what we saw in 2012 - slow and steady.
So the big questions, why was 2013 a spike and why hasn't 2014 continued the upward trend?
First off, why was 2013 a spike? The biggest reason, I believe, was the interest rates. Rates hit the floor in April/May of 2013. Signs were all there that they're going to start climbing (which they did) by June of 2013. For many fence-sitters that was incentive enough to hurry up and buy right away. Supply was better as well, in most markets, and fixer/investor opportunities in foreclosures were dwindling but still a factor in the market.
And why hasn't 2014 continued up? You can already guess a few reasons, the two big ones are interest rates and supply. Interest rates are nearly 1% higher today than they were last year. That's a huge shift in affordability for many buyers. Higher rates squeeze out the ability for some to purchase and force many others to lower their anticipated purchase price. The other factor is supply. Some areas are so tight on listed supply that there are simply little to no options for buyers. This leads to a natural slow-down, if there aren't enough listings to keep up with demand the pace will lag. That's happening almost across the board in Missoula this summer, from houses price at $425,000 and under - they're all under the ideal 6 months of listed supply.
What this does is change what you as a buyer and seller need to expect out of the rest of the 2014 market.
As a seller you need to focus more strategically on your market position and be aware that the stories of "we sold in a day" that occurred in April/May/June of 2013 are probably not going to happen much this year. I'm not saying it wont happen, but it seems the probability of it happening isn't as high. In some areas and price ranges though things are moving at a pace that is still incredibly fast. Some price ranges in the valley, most specifically $200,000 to $275,000 right now are so low on supply it's almost a seller's market.
So, as a seller, if you're contemplating "getting ready for next year," I'd suggest to reconsider until after you've reviewed your neighborhood's supply and the supply and activity within your price range. You may be quite surprised to find this summer market is in desperate need of a listing like yours and there's buyers that will pay top dollar for it.
Shifting focus to buyers in this market you're going to need to also be aware of supply and demand within your price range and your desired areas. You may find yourself competing with a lot of other buyers on brand new listings and not have the time or luxury to negotiate long with a seller. Seller's markets don't allow you much room or time to negotiate, you may have to take a few concessions in your ideal list of items in a home, and you may have to accept some condition items that you could have negotiated repairs on in prior years. Also, if you're looking for a fixer/foreclosure... good luck, they only account for about 4% of our market now, the Missoula valley supply of foreclosed houses that are listed has slowed to a trickle.
Looking ahead to the second half of the year I don't expect supply to magically get better. This is going to lead to some sellers doing really well and some buyers getting really frustrated with lack of options and then getting stuck in bidding wars. I'm betting Missoula's sales finish with about 950 to 1000 total sales, which would mark the 2nd best year since coming off the floor. 2013 had 1122 sales, 2012 had 919, and 2011 had 753.