LIVE BOZEMAN STYLE

I talked with Cec at Millers Jewelry about gold last week and asked if the prices were high because of the election cycle. Surprisingly, I learned that gold had expanded to an all-time high value in October of 2024 because of war. WAR. Folks in war-torn countries have lost confidence in their currency and are hedging their bets financially by converting their currency to gold. Gold’s value is timeless, but currency is subject to inflation and government collapse. Gold is insulated from fluctuations in local currency. Gold is an actual thing; it is collateral, not subject to market confidence. This conversation got me thinking: how does this currency vs. collateral conversation translate to real estate?

The election cycle we are currently in affects the activity of the market, just like war and gold. Even though inflation has dropped to 2.4%--a significant recovery from June 2020, when it was 9.1%--and interest rates have returned to a more normal rate (hovering just under 7%), home buying has slowed since June 2024, with our Bozeman market averaging 6 months of inventory for the first time since 2019. This supply increase reflects buyers' hesitation about the election's outcome and sellers holding firm in their expectations around price. “Is now the right time to buy?” “Should I wait to sell?” “What will happen if X gets elected?” The unknown is paralyzing to significant purchases, such as real estate.

We Are On a Precipice of Relief:

Six months of inventory is, by definition, a balanced market, a condition nearly unheard of in Bozeman. The Gallatin Valley is typically a seller’s market, with demand outpacing supply since at least 1979 when my dad started tracking it as a Bozeman real estate broker. The current market is creating a unique, albeit likely short-lived, opportunity for buyers to negotiate more competitively in the purchase process. I am confident that when we exit this election cycle, our market will return to a seller’s market, with less than 6 months of inventory by January 2025, as it will no longer be holding its breath for the “what if?” Instead, buyers and sellers will now be free to decide based on “what is.” 

You’ve heard the Mark Twain quote, “Buy real estate, they aren’t making any more of it.”

Real estate always holds value, and existing land naturally limits the supply. The more desirable the area, such as Bozeman, the more notable the asking price. Limited by geographical restrictions (think huge mountains), the space we can build in Bozeman is physically limited. While everyone needs a place to live, not everyone has the opportunity to be a single-family homeowner in a community like Bozeman. 

The Value of Real Estate:

Real estate is not just a physical property or structure; it is also a home or a business and the outcome of a vision. It provides relief from the world and respite from the elements. It is a safe space for you, your family, your pets, and your friends. It is the place we gather. It is the space where first dates are had, dreams are built, and family traditions transpire. Homes are the “why” in your life. This is why it’s essential to know your “why” so you can buy the “what” that will support all your significant life milestones.

Natural Cycles:

We need to buy and sell real estate based on our current life cycle. According to the National Association of REALTORS®, the typical homeowner stays in a home for 8 years… about the same duration a successful president remains in office!   

First, we live with our family as we grow up and experience their version of home. Then, we move out on our own and have our first opportunity to determine what our “home” really means for us as an individual. For many young folks, their first home is an opportunity to create and find solutions because rent payment is a substantial new experience in their budget! I remember my first college apartment was filled with furniture made from cinder blocks and plywood. It is incredible what you can make from nothing!

As we continue to grow independently, we may be able to buy our first apartment, condo, or house. It serves us beautifully as we move through the first phase of a professional career and find our footing in the world. Then, as our lives evolve, we may add a spouse, children, and pets, and the once-perfect home is now bursting at the seams! The season has changed, and it is time to shift our real property to reflect our new life.

Upgrading will be much easier to achieve with the equity from your first property having grown for you. Imagine the difference between buying a $700,000 house with $300,000 down from the sale of your first home as opposed to the $30,000 you had as a deposit on the first $300,000 property. Your payment today is likely $2,000 a month lower than it would be for the same house if you had tried to buy it as your first property and didn’t benefit from the equity of that first purchase. You are likely working with a larger income today, an improved career, and new opportunities in your purchasing power. If you had tried to buy your first home for where you are today, you would have been broke and prattling around a house with empty rooms as it was more than you needed, and you wouldn’t have had any money for furniture!

Further, you probably wouldn’t have gotten the purchase right. There is no way to know what tomorrow will bring, so purchase for today. If you are single, buy what you love and need; when you find the perfect person to add to your life, buy with them together. Don’t purchase for what you IMAGINE they will want. That is a fantastic trap that can land you in disappointment. How could you know what you need for them when they don’t yet exist? 

Seasons Change:

Perhaps you’ve gone through your growth cycle and are entering a quieter time. As the kids are off to college and your current home feels empty, your needs can now come back to the forefront of all your decisions, and it might be time to consider downsizing. 

Moving to a property that fits you today creates space in your budget and time for the hobbies and activities you truly love. I have helped many empty nesters who struggled to put themselves first and buy for their reality today, not the memory of the demands on a property created by a house bustling with kids. They felt they needed to have a space for the kid’s families to come home to, when after careful consideration, they realized they would be better served to buy a house for their personal needs today and, with the relief in the monthly payment and demands on their time instead rent a VRBO when the kids do decide to come. It is a better fit for everyone, with space for each family to have downtime. This also creates an opportunity for someone to upsize into a space that meets their needs. 

Perhaps you’ve always dreamed of travel… but your big yard demands too much of your attention for you to be gone for extended periods. Consider a shift! Let that yard be filled with new life, allowing you to find a place that doesn’t require so much attention and care and instead get the relief from responsibility to live the life you now want to cultivate.

Equity in Service:

Homes are here to serve us. We don’t serve them. They serve as a source of financial security. They are the heart of our family, the space where our most fond memories are made. 

As homeowners, we can choose when and if we increase our expenses. As renters, that choice is at the discretion of your landlord. As homeowners, we can elect to pull from the equity of our homes to create freedom in other aspects of our lives. We can eliminate credit card expenses and pay for college tuition. Or we can live payment-free. We can use our equity to eliminate a house payment and shift to a property we can afford with no monthly payment.

As homeowners, we aren’t subject to the market's will. As long as you buy your home for the right reasons, at a price you can sustain, you are shielded from the will and shift of elections and movement in the economy. Much like the weather in Montana, if you don’t like where the market is headed, wait 5 minutes. Markets shift, and the timing will always be suitable if you focus on your needs, first.

Remember how your first mortgage felt like the absolute maximum you could swing when you purchased 10 years ago? (My first house payment was $760 a month, a payment that is nearly laughable today) By the time I sold, my neighbors were renting for $2,000 a month, and if I had bought that house at that time, my monthly payment would have been $1,700 a month. My equity provided me with the freedom to upsize. I am also free to travel, buy luxuries, enjoy leisure, and so on! It is all available because you elected to take the leap of faith that protected you from the cyclical economic shifts. 

As we move through this time of fear and anxiety, evaluate where you are today. How comfortable you are in your home. Evaluate whether your home is creating the best version of your life or if it reflects old needs, values, and expectations. Is it time to upsize, but interest rate chatter has kept you from considering a move? Is the house too big, but it’s paid off, so why would you move? 

Evaluate your why today, and make sure it matches where you are today… not where someone told you should be or where you eventually would like to be. Interest rates are constantly moving, but real estate is forever. Find your perfect house, and then pay attention. Make additional monthly payments to reduce debt service, have the seller buy down your interest rate, or find a way to get to a “yes” that is true for you. Not the “no” you’ve been living in because you were told it was right today. 

Your investment in your real estate life becomes opportunity. It is your gold. No matter what, no matter when, someone will see value in it… most importantly you!