Real Estate Trends - Market cooling in 2023

by Tina Daugherty

2022 was chaos as properties sold faster than we could list them, with multiple offers, bidding wars and a generally unpleasant market for all but the sellers. Appreciation was high, which is a double-edged sword for taxes and other considerations (about 25%). We also seemed to have an ever shrinking inventory!

The inventory is still not climbing much as the rates continue to climb. This is likely due to a few factors; the loan rates on many homes financed in the last few years are under 4%, which will be hard to replace with a near 7% interest rate loan, and there are few opportunities to stay in Montana with inventory so low all over the state. The reasons people move away are grandkids and health. Typically they would just as soon stay.

As for 2023, the market is cooling, due to seasonality, interest rate hikes, affordability and lack of inventory, but is still alive. Until the inventory numbers rise, the prices will continue to climb, albeit slower than the last year. Demand is still respectable. You couldn’t eat the scenery was the motto in years past when jobs were scarce and so was our population, but telecommuters are changing the landscape. They can choose to live wherever their hearts take them. This changes everything in our valley.

Many have been waiting for this market to crash. Are we standing on the precipice, just as it was in 2006, right before the fall? We saw it coming in those years and it took much longer than anyone could imagine (watch The Big Short for an explanation), but fall it did.

Looking for a hint as to when the market will morph? In my opinion, our leading indicator will be when there are more properties to choose from as inventory climbs and that hasn’t happened yet. From the inside it looks like the real estate market in 2023 will be less frenzied, with less appreciation until that tipping point when the inventory builds.

And in closing, in all things give thanks for our beautiful area, way of life and amazing community. We are blessed!

Tina Daugherty is a Broker Associate with Realty Northwest in Thompson Falls and has been selling real estate for 30 years. Reach her at [email protected].