November 16, 2022
November 14, 2022
In recent years, the Bozeman real estate market has been chaotic. Homes skyrocketed from the market, buyers had to bid well above the asking price to get their bids to the top of the pile, and each month the monthly reported median selling prices seemed to rise higher and higher.
But in recent months, things have started to feel different.
“It’s not necessarily a fireball anymore, where something is listed and you have five seconds to go see it, or there are 20 offers on it,” said Aaron Cribbes, adviser at Engel and Volkers.
Marc Parent, a broker with Bozeman Brokers Real Estate who has been in the real estate industry for nearly two decades, said his year has started well.
But when contacted last week, Parent said he was about half as busy as last year.
“The tap went off for me,” Parent said. “I think the most important thing, the word I would use, is probably urgency. I feel like the sense of urgency has totally stopped.
Recent housing market data confirms their experiences that the Bozeman area housing market is slowing slightly and becoming more predictable.
Bozeman is part of a national trend as rising interest rates have impacted real estate across the country. But in a market where the median price of a single-family home has fallen from $459,000 in July 2019 to $745,000 in July 2022, any sign of a slowdown is notable.
“It’s a normalization of what used to be a lopsided market, which is how I see it right now,” said Joanna Harper, chair of the board of the Gallatin Association of Realtors.
Several local real estate agents say their business is much calmer these days. They have more time to bid on homes and can negotiate things like appraisals and inspections.
“This million dollar property that three months ago would have had six or seven offers may only have one (offer) in a few weeks, and it may not be full price” said Arison Antonucci-Burns of Aspire Realty. “I think it’s patient, more than anything, it becomes a more patient market, it’s not as aggressive.”
For Parent, whose business has slowed over the summer, the only consistency with real estate is inconsistency, and he noted that even though he is experiencing a downturn, the industry is such that his colleague hallway could be frantically busy.
But there’s no doubt in his mind that things are different at Bozeman. He compared the current feeling to the start of the pandemic in 2020, when for a few weeks everyone was in a “waiting pattern” as people waited to see what happened next.
Of course, we know what happened next. Median sales prices for single-family homes soared, supply was far outstripped by demand, and the shocks rippled through the rental market.
Stories of the hard market abounded. Potential buyers offering way more than the asking price for a property they hadn’t even viewed and were passed over for people offering even more, buyers with financing were beaten up by people offering all the money, and Bozeman has become a poster child for the pandemic’s housing craze.
Although things are cooling slightly, there hasn’t been a big drop in prices: the median selling price of a single-family home in the Gallatin County market was $812,750 in January of this year, according to the association of real estate agents. It was $450,000 in January 2020.
While the cooling did not drive prices down to pre-COVID levels, there were other implications.
Estate agents actually need to market properties now, Cribbes said, rather than just relying on frenzied demand to sell their properties. Since prices are no longer rising rapidly, Harper said real estate agents are able to glean useful information from recent data when pricing homes or making offers.
Harper said buyers also have more bargaining power. During the heat of the COVID market, buyers used to forgo contingencies like appraisals or inspections to sweeten the deal, but now that’s happening less and less.
Harper and other realtors said cash offers can now offer the buyer a discount off the asking price, whereas during COVID cash offers often simply help put a buyer at the top of the list , but at the asking price or more.
Antonucci-Burns said the recent relative stabilization has prompted some residents waiting for the market to buy.
“People who were waiting, who were saying ‘There’s no way Bozeman can go any higher’ and who sat down and paid high rent, now they’re coming back to the table,” Antonucci-Burns said. “Fence keepers aren’t fence keepers anymore, they’re actually jumping now.”
Lexi Olson and her fiancé thought they were about a year away from buying a house. But earlier this summer, they learned their rent was going to go up enough that they figured it wouldn’t hurt to look.
They had a budget of $500,000 to $700,000 and planned to use a loan from Veterans Affairs.
Olson said they eventually found a spot in the middle of that range, though she declined to share the exact sale price.
“What I found was it was fairer, if that makes sense,” Olson said of his experience in the housing market. “We didn’t feel like we had to bid 10,000 or 15,000 more than he was signed up for. We definitely felt we could make a fair offer.
Antonucci-Burns, who said he felt a change in the market in April, pointed to a change in interest rates as one of the main causes of the market cooling.
Freddie Mac reported this week that the 30-year mortgage rate was 5.66%. It was 2.87% a year earlier.
The increases dented what many potential buyers could afford and pushed others out of the market altogether.
Harper said the impact of rising interest rates was expected. It appeared quickly in the data.
In July, according to the Gallatin Association of Realtors, the median price for a single-family home in July was $745,000. This is an increase of 9.2% from last July, but down from the median June 2022 price of $752,500, the median May price of $812,000 and the median of April of $823,750.
Median prices for condo and townhouse sales have been more variable, starting the year at $475,000; reaching $657,000 in February. The median price for these units in July was $535,000.
But July marked the fourth month in a row that both home types — single-family and condo/townhouse — had increased inventory, with 91 new condo or townhouse listings and 193 new single-family home listings.
Listings for both unit types also spent longer on the market in July. Single-family homes spent a median of 18 days on the market in July – down from eight days last July, and condos/townhouses spent a median of 22 days in July, down from a median of four days for this month in 2021.
But that’s not all good news for those looking to buy.
Cribbes pointed to months of inventory data — which measures how long current listings on the market would meet current demand — as an indicator that the region’s market is still unhealthy.
July data from the Gallatin Association of Realtors shows there was 3.8 months of inventory for single-family homes and 3.1 for condos and townhouses.
Harper, with the Association of Realtors, explained that months of inventory is a valuable statistic because it gives a good idea of the pace of the market and measures supply versus demand.
The rule of thumb for real estate agents, Harper said, is that “buyers’ markets” have about five or six months of inventory.
Bozeman is therefore still considered a seller’s market, Harper said.
“We still have low inventories, which… would suggest that we would not see a rapid deterioration in prices, as we would need more supply than there is demand at a meaningful level,” said Harper.