Cooling Housing Market Conditions in Montana

Current Market Sentiment

The summer season has brought about cooler conditions in the housing market across Montana. Brian Huskey, an ERA American Real Estate agent based in Billings, Montana, notes, “The market currently feels lukewarm. While there is still moderate demand from buyers, many are on the sidelines due to housing affordability and interest rates influencing their decisions.”

In Billings, as of July 19, 2024, the 90-day average Altos Research Market Action Index score was 38.77. This represents a decline from 44.48 a year earlier and 51.72 in July 2022. During the peak pandemic market in June 2021, Billings reported a Market Action Index score of 75.42. Altos considers any score above 30 to indicate a seller’s market.

Relative Market Stability

Despite the cooling market, Billings’ decline in the Market Action Index is relatively moderate compared to other pandemic hotspots like Austin, Texas, where the score dropped from a high of 100 in June 2021 to 33 in mid-July 2024. Huskey attributes the stability in Billings to its working-class community and stable job market, particularly in large refineries and the medical field, which provide consistent housing market stability.

Bozeman Market Observations

Charlotte Durham, leader of the Bozeman-based Sotheby’s International Realty Charlotte Durham Team, acknowledges a slowdown in her local market. “This June was the slowest we’ve seen in many years,” she remarks. Although activity picked up slightly post-Fourth of July, the pace remains slower compared to pre-COVID levels.

In Bozeman, the 90-day average Market Action Index score dropped to 32.38 in mid-July 2024 from 66.88 in early June 2021. For high-end properties priced between $1.38 million and $2.835 million, the score fell to 37.93 from 72.75 in December 2021. Properties priced around $2.835 million saw the score decrease to 29.74 from 44.75 in December 2021.

This market cooldown presents opportunities for buyers. “In the $2 million to $5 million range, there is now quite a bit of inventory, leading to potential price reductions,” Durham explains.

Market Price Trends

Compared to the previous year, the 90-day average median list price dropped by $300,000 to $1.2 million, based on Altos data. For properties above $2.835 million, list prices have decreased from $3.6 million in mid-April to $2.9 million by mid-July.

However, lower list prices have been challenging for sellers. Austin Baumgartner, leader of the Hidden Homes Montana team brokered by Keller Williams Northwest Montana, notes, “The market is better than in summer 2022, but still similar. We see more price reductions, and some sellers are panicking if properties stay on the market for 90 days instead of the usual 45 days.”

Baumgartner views the increase in days on the market as part of a more normalized market. “Inventory is rising, though not as high as in 2019. It’s better than it has been, still leaning towards a seller’s market, but moving towards a balanced market.”

Statewide Market Analysis

Statewide data from Altos supports this assessment. As of mid-July, the 90-day Market Action Index score was 33.66, indicating a slight seller’s market. The 90-day average for active single-family listings rose to 3,258, the highest since mid-March 2020 at the onset of the COVID-19 pandemic.

Despite the increased inventory benefiting buyers, home prices in Montana have significantly risen over the past five years. In late summer 2019, the 90-day average median list price was approximately $390,000. By mid-July 2024, it had surged to $725,000.

Challenges for Local Buyers

This price increase is largely attributed to the pandemic homebuying boom and an influx of out-of-state buyers, making it challenging for local residents to purchase homes. “Inflation and lower wages for in-state jobs make it nearly impossible for most Montanans to buy homes unless they are in higher-paying industries,” Baumgartner explains.

Robyn Erlenbush, an ERA Landmark Real Estate agent in Bozeman, has also seen the impact of rapid home price appreciation on local buyers. The influx of cash buyers and rising interest rates have created a competitive and difficult environment for local buyers, with some needing to purchase homes far from their jobs in Bozeman.

Future Market Prospects

Should interest rates decline in the coming months, local agents predict a possible advantage for buyers, though it may be short-lived due to election-year uncertainties. Baumgartner anticipates, “If interest rates drop, we could see a busy fourth quarter with multiple offer situations, especially for properties below $1 million. The market dynamics will be interesting to observe.”

In conclusion, the Montana housing market is experiencing a period of adjustment, with opportunities and challenges for both buyers and sellers. As conditions continue to evolve, stakeholders must remain adaptable to navigate the changing landscape.