How Lower Interest Rates Could Affect Bozeman Real Estate

The Bozeman real estate market shifted in 2024. After a few years of soaring home prices and low supply in 2022, we began to see signs of a slowdown in some aspects. This was when mortgage rates started rising and the number of homes sold began to decline, but home prices in Bozeman didn't change much. Throughout this year, we have seen an increase in inventory and interest rates starting to trend downward. We expect these two factors to impact the Bozeman real estate market in various ways.

HOMEBUYERS ARE GOING TO GET BACK IN THE GAME

The Federal Reserve is expected to lower interest rates in September and continue doing so throughout the next year. Currently, rates are the lowest they've been in years, which is starting to bring buyers off the sidelines. High rates and home prices had previously priced many buyers out of the market or forced them to pause their home searches. Now, with interest rates dropping, more buyers are returning to the market, considering if it’s the right time to resume their search.

COMPETITION COULD INCREASE

As more homebuyers re-enter the market, competition could heat up again. While trying to time the market for the lowest possible rate might seem tempting, it could lead to increased competition and bidding wars. Currently, inventory in Bozeman remains high, offering buyers plenty of options. However, as interest rates continue to drop, that inventory is likely to be quickly absorbed, increasing competition among buyers.

INVENTORY COULD DECLINE

The number of homes listed on the market in Bozeman dropped 28% between 2020 and 2023. Fast forward to the middle of 2024 and the number of homes listed on the market increased 28% compared to all of 2023! This is good news for buyers coming on the market because they have more to choose from and more negotiation power. Generally, we see listings begin to slow in the fall and winter so inventory is going to decline. If more buyers emerge, the same supply and demand issues may arise, leading to increased home prices and bidding wars.

HOME PRICES MIGHT START INCREASING

Throughout 2024 we have seen the median sales price of homes in Bozeman level out and even start to decline. This has been a result of more inventory and less buyer demand. Price reductions have become much more common as sellers struggle to find buyers for their homes. Lower interest rates have the potential to have a significant impact. There is a considerable amount of pent-up buyer demand, and if rates decrease, there will likely be an influx of buyers in Bozeman. These buyers, along with new residents moving to town, will start purchasing the homes currently on the market. If there isn't enough new inventory to replace the homes being sold, we will probably see home prices in Bozeman begin to rise.

THE TAKEAWAY -

Experts think we will see interest rates fall throughout this next year and land between 6-6.5 %. The idea of them going below 6% feels like a long shot. We have been told in the past that rates were going to fall and they haven't so it's easy to be leery of this speculation. However, since we are seeing them trend downward right now, waiting for them to fall further may not be a good idea. For buyers, it's best to think about your budget and not get too caught up in mortgage rates because there are a lot of unknowns. If you can buy a home within your current budget, it could be a good time and if interest rates drop you can refinance. 

Do you have more questions about current interest rates? Contact us, we'd be happy to help! If you're ready to start your home search, sign up for new listing notifications to see when homes in your criteria come on the market.