Fall Market Update | L&K Real Estate

The statement "Change is the only constant in life" might be one of the most accurate quotes of the past few years For many people, how they live, where they live, and what they do for a living have changed dramatically in recent years. It has been a blessing for many people to be able to work remotely, while others have had the courage to make a change and embark on something new As a result, thousands of people have migrated in and out of major cities in search of a fresh start in the future, with Bozeman and Big Sky, Montana ranking high on the national list

Real estate prices soared to record levels, and the term "frenzy" became synonymous with the market

The market has shifted and a market that was previously in favor of sellers now contains more patient buyers who are willing to wait for the right opportunity. To paint a picture of where things could go in the months ahead, let's dive into the dynamics that have led to this and share some of our insight

Over the past two years, the substantial imbalance of

This year, buyer demand has eased

Inflation

reach an inflection point

demand pushed home sales and

competition to new heights. But in 2022, things are shifting as supply

uncertainty moderated the market This slowdown in demand is

matching the overall rise in costs (inflation rate) or drastically outpace it How will this play out in 2022? Although we don’t know exactly where it will be at the end of the calendar year, nationally the inflation rate stands at 9 1%, while the local median price in Bozeman has gone up 16% and Big Sky has gone up by 18% over that same period (Chart 5).

Supply

There are yearly fluctuations that are apparent when looking at the data with inventory being at its lowest levels in the winter and highest levels in the summer However, after a period of gradually decreasing inventory levels, we have now seen the supply of non acreage, single family homes increase to levels not seen since before the onset of the pandemic (Chart 2) If history is an indication, we will see the amount of homes on the market start to fall throughout the end of the year and see them start to pick back up again as we head into Spring

Demand

The other half of the equation is demand Although there are also a number of factors that affect demand, likely the biggest factor at play involves finances and buying power Since the beginning of the year, the SP 500 is down approximately 16% This has left many potential cash buyers unwilling to liquidate their holdings at losses to facilitate a home purchase Also, in that same time, interest rates have gone from around 3% to the mid 6% range (Chart 4) A year earlier, if someone didn’t want to use cash to purchase, they could borrow money so cheaply that it didn’t keep them on the sidelines However, this has changed and not only are some of those cash buyers on the sidelines, but many of the buyers who had planned on using financing are also being more patient, and rightfully so (Chart 3) Given this, buyers are waiting for the perfect house and no longer willing to jump at any opportunity

THINGS TO CONSIDER WHEN BUYING A HOME

1 TheNumberofHomesforSaleIsIncreasing

Whilethenumberofhomesforsaleisstilllowcomparedtopre pandemicnorms, thereisgoodnewsforyourhomesearch.Thenumberofhomesforsalehasgrown considerablythisyear AstheNationalAssociationofRealtors(NAR)says:“It’svery promisingthathousinginventoryisimproving Therearenearly30%morehomes availableforsalecomparedtoJanuary ”

2 HomePricesAreAppreciatingMoreModerately Ifyou’rewaitingtobuybecauseyouthinkhomepriceswillfall,youshouldknow expertssaythat’snotprojectedtohappen Accordingtothelatestforecasts,experts projecthomepriceswillkeepappreciatingnationally,justatamoremoderatepace thantheydidoverthepastyear Thegoodnewsis,onceyoudobuyahome,any ongoingappreciationwillhelpgrowthevalueofyourinvestment

3. HomeownershipCanGrowYourWealth Onceyouownahome,you’llownatangibleassetthattypicallygrowsinvalueover time Ashomepricesappreciate,andasyoupayyourmonthlymortgagepayment, you’llbuildequityinyourhome Thisgivesyourownnetworthandstabilityaboost As FreddieMacsays:“Buildingequitythroughyourmonthlyprincipalpaymentsand appreciationisacriticalpartofhomeownershipthatcanhelpyoucreatefinancial stability ”

4. BuyingaHomeHelpsShieldYoufromRisingCosts

Censusdatashowsthemedianmonthlyrentisconsistentlygoingup(seechart below) andhasbeensincethelate1980s.Toescaperisingrents,considerpurchasingahome soyoucanstabilizeyourmonthlyhousingpayment.Homeownershipallowsyouto lockinwhat’stypicallyyourlargestmonthlyexpense:yourhousingpayment.

TIPS FOR MAKING YOUR BEST OFFER

1.KNOWYOURBUDGET

Thebestfirststepisworkingwithalenderandgettingpre approvedforaloan Yourpre approvalindicateshow muchyou’reabletoborrowforyourmortgageandshowssellersyou’reserious

2 LEANONTHEREALESTATEPROFESSIONAL

Agentsareexpertsinwhat’shappeninginthehousingmarketandinyourarea They’llhaveinsightintothelatest trends,whattheymeanforyou,andwhat’sworkedforotherbuyers

3.MAKEASTRONG,BUTFAIROFFER

Asthepeakintensityofdemandiscoolingthisyear,thenumberofhomessoldoveraskingpriceisdecreasing Lean onyouragenttohelpyouunderstandthecurrentmarketvalueofthehomeyou'reinterestedinandrecentsales trendsintheareasoyoucancraftyourbestoffer

4.BEAFLEXIBLENEGOTIATOR

Whenputtingtogetheranoffer yourtrustedrealestateadvisorwillhelpyouconsiderwhichleversyoucanpull includingcontractcontingencies(conditionsyousetthatthesellermustmeetforthepurchasetobefinalized) Of course,therearecertaincontingenciesyoudon’twanttogiveup,likethehomeinspection

I N V E N T O R Y

Whilethesupplyofhomesavailableforsalehasincreasedthisyearcomparedtolast, we’restillnowherenearwhat’sconsideredabalancedmarket

Herearefivekeyquestionstoaskofanybrokeryoumaybeinterviewing

2

3

Atwhatpricedoyouthinkmyhomewillsuccessfullysellinapproximately 30days?

Itshowssupplythisyearhassurpassed2021levelsbyover30% Butthefurtherback youlook,themoreyou’llunderstandthebigpicture Comparedto2020,we’rejustbarely abovethelevelofinventorywesawthen.Andifyougoallthewaybackto2019,thelast normalyearinrealestate,we’reroughly30%belowthehousingsupplywehadatthat time

Whydoesthismattertoyou?Wheninventoryislow,thereisstilldemandforyourhouse becausetherejustaren’tenoughhomesavailableforsale