Since the Federal Reserve began its interest rate hikes in early 2022, mortgage rates have jumped nearly 4%. There is no doubt that rate hikes like that will have an impact on the real estate market. But the question is, how have they affected Bozeman’s real estate market? And are we seeing home prices in Bozeman drop as a result? Here's what we are seeing right now.
Since mortgage rates started rising, we have seen a fluctuation in the median sales price of a home in Bozeman. In August of this year, the median sales price in Bozeman reached its highest point ever at $855,000 but since August we have seen the median sales price drop to $713,700, 3.6% below what it was at the same time last year.
Median sales price aside, we are seeing other signs of a slowdown in Bozeman's real estate market. At the height of the market in the Bozeman area, you would rarely see a home come on the market for under half a million. Especially if you were searching for single-family homes! Now in the under $500K price range, there are close to 50 homes currently on the market.
We asked Bozeman Real Estate Group agent Bronson Neff about why we have yet to see a significant drop in prices in the Bozeman area. He said, “the high interest rates have significantly affected the bottom half of the market. Those buyers are sitting on the sidelines until rates drop. The total volume of sales is certainly down and with that, the top half of the median price point is keeping the overall median price where it is. Buyers in the top half of the market may be able to absorb the higher interest rates due to potentially higher income and/or being able to put a significant down payment from the increased equity in their homes, or they are paying with cash and therefore unaffected by the rising rates."
Homes are also taking longer to sell. The median number of days a home spends on the market has gone from 6 days in May of this year to 47 days in October. You can read more about what we are seeing in Bozeman's real estate market now in our recent real estate market update.
It's a similar story in Bozeman's surrounding communities. Livingston's median sale price saw a drop over the summer, but it has started to come back up to where it was at the beginning of the year. In Three Forks, the median sale price has fluctuated. While it saw a big drop in September, the median sales price rebounded in October to higher than what it was at the beginning of the year. In Belgrade, prices have stayed relatively steady since the beginning of the year with no significant increases or decreases. It is important to note that in these smaller towns, the number of homes sold each month is very low. This small sample size can have a big impact on the reported median sold price each month.
While we aren’t seeing any significant drops in home prices, we are seeing an increase in price reductions. In October 2023, we have seen an average of 55 price reductions each week in Gallatin County. This indicates that while homes may not be coming on the market at lower prices, they are sitting on the market longer which leads to price reductions. To see the most recent price reductions, click here.
While we may not see it in the numbers yet, there are a number of factors that are signaling a slowdown in Bozeman's real estate market. We are seeing buyers in the lower price points drop off because of the rising mortgage rates. Buyers in the higher price points are continuing to purchase properties and that may be what is keeping the median sales price in Bozeman steady, for now. To keep an eye on what the market is doing, bookmark our market report page.
Would you like to discuss the market with someone on our team? Click here.
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