2020 Market Report Real Estate
2020 Market Report | Southwest Montana Real Estate
2019 was another exceptional real estate market in Southwest Montana, particularly in Bozeman. What should you expect in 2020? We think more of the same. Strong interest rates continue to fuel the Bozeman market, and the most limiting factor continues to be inventory. Our primary goal is to provide you with facts relevant to our particular market.
Most people we encounter seem to be asking the same general questions – Will the market continue to favor sellers? Will we begin to see a more balanced market as we progress into a new year? What about interest rates? Are any segments of the market expected to soften? This report will prepare you for what to expect in the 2020 local real estate market.
Interest Rates
Last year, we reported that interest rates were expected to rise. Instead, we saw three interest rate cuts in July, September and October, as reported in the Washington Post. The general consensus is that rates will hold for 2020. Local rates for a conventional 30 year fixed rate mortgage remain less than 4%.
Housing Shortage
It’s no secret that our greatest challenge in the Bozeman area is the housing shortage–particularly affordable units. We are happy to report that Belgrade is stepping up to help meet this demand. In 2019, Belgrade had a 20% increase in total sales. 31% of these sales were newly constructed residences. Comparatively, there was a 3% decline in sales within the Bozeman City limits.
Also in 2019, Belgrade added 6 new subdivisions or phases of existing subdivisions, with noticeably lower home prices compared to similar homes in Bozeman. As a result, we are seeing more buyers choose to relocate from Bozeman to Belgrade, as they are able to buy newer homes at more affordable prices. However, there is still only 2.7 months supply in Belgrade, and median home prices were 9.2% higher in 2019 than in 2018. For all of these reasons, we predict that both the Seller’s market and appreciating prices will continue into 2020. In Bozeman, however, not much has changed. Bozeman buyers continue to see high demand and low inventory. In all but 1 month in 2019, the residential inventory in Bozeman was less than in 2018.
It’s no secret that our greatest challenge in the Bozeman area is the housing shortage–particularly affordable units. We are happy to report that Belgrade is stepping up to help meet this demand. In 2019, Belgrade had a 20% increase in total sales. 31% of these sales were newly constructed residences. Comparatively, there was a 3% decline in sales within the Bozeman City limits.
Also in 2019, Belgrade added 6 new subdivisions or phases of existing subdivisions, with noticeably lower home prices compared to similar homes in Bozeman. As a result, we are seeing more buyers choose to relocate from Bozeman to Belgrade, as they are able to buy newer homes at more affordable prices. However, there is still only 2.7 months supply in Belgrade, and median home prices were 9.2% higher in 2019 than in 2018. For all of these reasons, we predict that both the Seller’s market and appreciating prices will continue into 2020. In Bozeman, however, not much has changed. Bozeman buyers continue to see high demand and low inventory. In all but 1 month in 2019, the residential inventory in Bozeman was less than in 2018.
New Construction
Nationally, construction activity increased in 2019 compared to 2018. However, the total units built are not expected to meet demand (2019 GAR Annual Report). Can our local market meet the demand? Belgrade issued 331 Building permits in 2019 compared to 215 in 2018 — nearly a 54% percent increase! According to the Belgrade Planning Department, most of the permits were for new construction. On the other hand, new construction sales in the Bozeman area decreased drastically in 2019, compared to 2018.
Luxury Market
In the Bozeman, Belgrade and Greater Manhattan areas, there were 87 luxury residential sales in 2019 compared with 71 sales in 2018. There are currently 97 properties priced over $1,000,000 listed for sale in these areas. This is why the luxury housing market is primarily a buyer’s market. A buyer’s market is one in which there is more than 6 months of inventory. The type of inventory offered greatly impacts expectations for buyers and sellers in this segment of the market.
According to the 2020 Luxury Home Marketing Report, more luxury buyers are diversifying assets, purchasing multiple smaller luxury homes instead of mega mansions, and moving to lower priced markets. Bozeman was a beneficiary of this type of activity in 2019, with buyers relocating or purchasing vacation homes.