By Kevin Wetherell
Clearwater Montana Properties, Inc.
The effect of rising interest rates
Mortgage rates have more than doubled this year, as 30-year mortgage rates have risen from below 3% last year, to near 7% presently. As a result, the number of homes sold in Seeley Lake has dropped 30% over last year at this time. Although the number of homes currently on the market in Seeley Lake has risen to 16, most are no longer selling quickly as they have in the past. Looking at homes currently on the market, the average is 160 days on market, nearly 5.5 months. Although the number of months of housing supply has risen over the past year, it is largely because homes are taking longer to sell, not because there is a dramatic increase in number of houses coming on the market. As a result, property values in the Seeley- Swan have dropped perhaps 10-20% in the second half of 2022, and the steep curved price increases that occurred earlier in the COVID-19 pandemic have subsided and now have reversed.
Home values then are not what they are now
Many local homeowners and prospective sellers were aware of the value of their home around the market peak that occurred late last year, and are now disappointed that just a few months later, the current market value has dropped, and may continue to do so. In the current market, it is critically important that the seller and their real estate agent communicate regularly about the sellers' goals and current market values and adjust accordingly. The good news for sellers is that home prices in the second quarter of 2022 were 23% higher than they were at the beginning of 2020. That's a lot of recently acquired equity for long time sellers and homeowners to fall back on if home prices have a substantial decline.
New listings may not be coming on the market
It has been a common occurrence for buyers to wait until spring as new listings begin to hit the market.
There may not be as many new listings coming on the market as there has been in the past. This may occur because of the "lock-in effect" – the financial disincentive for homeowners to put their home on the market, move and take on a new mortgage at a much higher interest rate than their current rate.
Many owners will be inclined to stay put with their current 2.5 to 3.5% interest rates, unless they are forced to relocate.
Good news for renters and the local work force
Over the past few years as values increased dramatically, many homes that were rentals providing local housing options had the lease terminated and the homes were sold. Now with declining home prices and longer days on market to sell homes, property owners may become more interested in renting their home and waiting out the market. Declining home values will result in investment returns in owning rentals look better than they have in the past for home investors.
Where are the buyers coming from?
It seems everyone is curious where the buyers are coming from – Over the past year, the number 1 number of buyers are from other areas in Montana, and then following in order are- CA, WA, CO, OR, ID, TX, and AZ.
Seeley Lake residential sales fast facts
Thus far in 2022, there has been a total of 45 homes sold. The same period last year resulted in 66 homes sold. In 2022, the average home price in Seeley Lake has risen slightly from $569,000 to $575,000, remaining flat. The average home is closing 150 days after being placed on the market in Seeley Lake. There are currently 16 homes active on the market. The homes range from $195,000 to $12 Million. An example is a 1,956 square foot home on 2.71 acres in the Double Arrow Ranch for $600,000.
There is one home currently under contract to be sold.
Condon residential sales fast facts
Thus far in 2022, there has been a total of 8 homes sold. 3 of those sales were over $1 Million. The same period last year resulted in 16 homes being sold. In 2022, the average home price in Condon has dropped to $744,000. The average home in Condon is closing within 63 days after being placed on the market. There are currently 9 homes active on the market in Condon. 6 of these are listed over $1 Million, and the least expensive is $499,000.
Average mortgage interest rates
Mortgage interest rates have risen approximately 3.4% so far in 2022. Mortgage rates may have peaked at over 7% in October and seem to be trending lower.
Current average mortgage loan rates are:
30- year mortgage is 6.64%; 15- year mortgage is 6.06%.
Has the market reached the bottom of the correction, is it going down further?
The question I get asked most often is "What is going to happen in the market going forward"? No one knows for sure, but the market data that is available to you can certainly help. In order to detect a slowing market and whether further declines may occur, I recommend watching market inventory. If market inventory continues rising, that could indicate further softening in the market. The other two factors to watch are increasing average days on market and frequent price reductions.
Presently, we are seeing these things occurring. Inventory is slowly rising, but remains tight, and the average days on market are rising. There are buyers in the market, if a property is not selling, sellers must consider resetting their asking price to the current market. Our valley remains sought after by people seeking to leave their home states for a better quality of life and rural living.
If you have any questions regarding the local real estate market or the purchase or listing of property, please contact your local real estate professional.
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