2020 was a year that many of us were happy to leave behind. From the perspective of real estate, the year 2020 feels almost inexplicable, but the numbers don’t lie. In the wake of a global pandemic, it has never been more important to be well-informed. The Bozeman and surrounding markets are challenging to navigate. Increased demand due to the pandemic has further exacerbated housing shortages, altogether leading to unprecedented price increases. The luxury market is booming, many are relocating to rural areas, and TSA travel volume reports show that Bozeman’s economy is more resilient than most. Our team at Hart Real Estate Solutions is committed to informing you and equipping you to enter the local markets. The information contained in this report will update you on 2020 market conditions as well as prepare you for what to expect in 2021.
General Market Trends
To quantify this, Figure 1 shows the Total Sales Volume in Bozeman between 2011 and 2019. The dashed line, or best fit line, shows that the annual increase in sales volume is approximately linear from year to year. In other words, the Total Sales Volume is increasing by about the same percentage each year. Now, let’s take a look at Figure 2, which introduces 2020 into the mix. This decade-long trend in Figure 1 was completely shattered by a staggering 46.8% increase in Sales Volume in 2020, over twice that of any of the previous annual increases. This massive increase was partially due to increased housing prices, but also because of unparalleled demand. More specifically, the Median Sale Price for a property in Bozeman grew almost 18.5% from $439,000 to $520,000 in the last year. This increase directly correlates to a plummeting inventory, displayed clearly in Figure 3. These general trends can be further explored by comparing different housing categories such as Residential, Condos, Commercial, and Land.
Specific Market Trends
No matter what area of the market that you look at, the trends are strikingly similar. To illustrate this, we have broken down the number of sales over the last 5 years in each of four categories: Single-Family Residential Properties, Condos, Commercial Properties, and Land. Notice that in each of these categories, there was a large increase at every price point except for the lowest one. Trends show that lower price bands are evaporating, exposing entry level buyers to extremely competitive bidding wars. This coupled with millennials entering the market in greater numbers, some buyers have found that the Bozeman market is simply beyond their budget.
Number of Sales (2016-2020)
Bozeman – Residential
Bozeman – Condos
Bozeman – Condos
Bozeman – Commercial Property
No one will argue about the insanity of the Bozeman Real Estate Market in 2020. However, the activity that the luxury market saw in 2020 was even more noteworthy. We reported in 2019 that the market for homes over $1,000,000 was primarily a buyer’s market (a market with more than 6 months of inventory). In 2020, however, the luxury market flipped almost entirely to a Seller’s market. Figure 16 illustrates theTotal Number of Sales vs. Months of Inventory; note that this shift happened just in the second half of 2020. To compare, in January 2020, there were 10 Total Sales and 20 Months of Inventory. Now flash forward to December, where there were 33 Total Sales and only 3 Months of Inventory! This increase is also displayed in Figure 8, which shows a huge jump between 2019 and 2020 for Total Residential Sales over $1,000,000. Therefore, it is without question the Bozeman Market is entirely a Seller’s Market. As explained by the 2020 Luxury Home Marketing Report, a “Seller’s Market gives sellers greater control over the price point. Typically, this means there are few homes on the market and a generous demand, causing competition between buyers who ultimately drive sales prices higher.” Bozeman has witnessed this trend in all price points.
Housing Shortage & COVID-19
As you now know, the ever-increasing demand in 2020 caused inventory to dip to historic lows, sending housing prices skyrocketing to record highs. The Bozeman market has become so oversaturated with buyers that many are struggling to find a home they can afford. Inventory shortages have become the norm in our local market. Though this has been the case for some time now, the impact of the global pandemic has further exacerbated the issue, due to the influx of buyers seeking smaller and safer communities. For years now, America has been gradually undergoing a population shift from urban areas to rural ones. However, the impact of COVID-19 turned what was just a ripple into a tidal wave of people trying to escape densely populated areas. Furthermore, stay-at-home policies implemented worldwide have allowed many to relocate their families while still retaining employment. This is a flexibility that, before the pandemic, was seen only in the tech sector. What did this mean for our slice of heaven in Southwest Montana?
To put it plainly, Bozeman’s lightning-fast market became even more hectic and complex, leaving many agents and buyers saying something along the lines of: “It has never been harder to find a home in Bozeman! This market is INSANE!” Insane though it may be, there no indication of a market “bubble”, or impending market crash. It is no secret that Bozeman’s housing market is booming. However, the Bozeman’s economy has shown tremendous resilience compared to the rest of the nation
Travel & Economic Resilience
In their annual report, Bozeman Yellowstone International Airport announced that “the COVID-19 global pandemic had a dramatic negative effect on passenger traffic during 2020.” More specifically, the airport handled 889,775 passengers, a 43.5% decrease compared to 2019. As daunting as this decrease may appear, it was nowhere near the downturn experienced by America as a whole. At the end of 2020, the TSA reported a 60.7% average decrease in checkpoint volume over the course of the year. However, if you include only the days after March 1st, when the travel volumes began to differ due to the pandemic, the average decrease is almost 72.2%, an astonishing figure. Figure 17 shows the difference between TSA Travel Volume in 2019vs. theTravel Volume in 2020 on the same day. This means that on average, the nation experienced a 66% greater decline in travel volume than Bozeman did. When analyzing an economy, tourism and travel are extremely important. Although travel decreased, the downturn was significantly less than the rest of the nation, indicating just how resilient that this segment of our economy is. Bozeman’s population has been steadily increasing at a rate of over 3% a year, and there is no indication that things are going to slow down any time soon.
The year 2020 will undoubtedly go down in history as the year of the pandemic, when most of the world stayed home. The international crisis that is COVID-19 has left many without jobs, homes, and a sense of safety. The virus that has ravaged the globe for over a year now has taken our family, friends, and loved ones. There is no question that 2020 was a year like no other; this should be accounted for when analyzing market trends. With that fact in mind, we predict that our housing supply will continue to experience strain and that housing prices will continue to increase. The driving force behind the demand is not a “bubble”, but rather an overarching demographic shift from urban to rural that is happening across America. Travel statistics indicate economic strength and stability, providing a solid foundation for all industries including real estate. To put it plainly, people love Bozeman. Bozeman is a vibrant and welcoming community, home to an excellent university, and nestled in one of the most beautiful areas in the country. World-renowned ski resorts and fishing, a downtown that gets national recognition, and some world-class sunsets to boot. During a year where most of the world was at home, Bozeman still managed to grow by almost 3%! People want to live here, and they are coming from all over. Just last year, our small office serviced clients from 18 different states!
Whether you are an investor, buyer, or seller, it is more important than ever to rely on competent counsel and experience to navigate this challenging market. Our team is committed to providing the information you need to make sound decisions in a tumultuous time. No matter what your real estate goals in 2021 are, please don’t hesitate to contact us for any additional information, or toschedule a free home consultation.