Montana's housing market listed as least affordable in entire US
Montana's housing affordability crisis is making national headlines lately, with a critical U.S. Senate race putting even more of a spotlight on an issue that was already top-of-mind for everyone living here.
The Treasure State's problem can be summed up with a simple comparison.
From 2018 to 2023, the median home sales price in Montana rose from $266,473 to $505,419, according to the Montana Association of Realtors. That's an eye-popping 89.6% increase. In that same time frame, U.S. Census Bureau data shows the median household income in Montana rose from $55,328 to $70,804 , a relatively paltry 27.9% increase.
Wage increases in Montana are not even close to keeping up with housing price gains.
Recently, the National Association of Realtors came out with a report that listed Montana as the least affordable state in the entire country, based on its Affordability Distribution Curve, which measures "housing affordability at different income levels for all active (houses for sale) on the market."
So, based on incomes in Montana compared with the prices of homes for sale, the Association found that Montana is less affordable for homebuyers than even California and Idaho, the two other least affordable states.
In Helena, the median home sales price from 2018 to 2023 went from $274,900 to $464,950, a 69.1% increase. In Butte, the number went from $144,609 to $280,000, a 93.6% increase. For Billings, it went from $248,500 to $375,000 in that same time frame, a 50.9% increase. In the Bitterroot Valley, it went from $280,000 to $609,000, a whopping 117.5% increase. In Missoula, the price rose from $293,375 to $579,900, a 97.6% jump.
Jim Bachand, the CEO of the Missoula Organization of Realtors, said the data wasn't a shock.
"The NAR Affordability Distribution Curve is reporting .38 score of active listings in Montana are affordable which is based upon income percentiles," he explained. "This score is a different measurement of affordability than how we present the data locally in Missoula. It should be no surprise that NAR reporting just confirms what we have known locally for many years."
Bachand said that income levels in Missoula and across Montana aren't keeping up with housing prices.
"One of the simple ways to think about affordability is to look at a household earning the median income of $100,900 (the median for all households in Missoula County in 2023), with a 6.25% interest rate and 20% down payment," he said. "(That household) can afford a home priced around $410,000. However, Missoula County, as of (Wednesday) only had 69 homes active (homes for sale) below this price, out of 442 active listings, illustrating a severe affordability crisis."
Of course, for low-wage workers buying a house is even further out of reach.
"Many residents earn less than the median income, making the housing shortage even more dire for a significant portion of the population," Bachand said. "This creates a split market, with more options at higher price points while homes at affordable levels are scarce. Buyers face tough competition in the lower price range, often having to pay closer to list price due to a lack of alternatives."
Bachand said Missoula's home prices have stayed high despite high mortgage interest rates.
"While elevated interest rates over the last several years have contributed to some of the declining home prices in other markets, Missoula's median home prices have remained firm and continue to rise," he said. "This presents a double-edged sword: nearly half of Missoula's residents benefit from sustained property values, but the ongoing price increases make it harder for prospective buyers to enter the market."
The report from the National Association of Realtors caught the eye of Missoula Mayor Andrea Davis, who before being elected worked for a nonprofit that develops and preserves affordable housing across the state.
"There are a few take-aways from this analysis," Davis said in an email. "First, this doesn't come as a surprise, as we have experienced housing costs outpacing wages for years, with the last few years catapulting the cost to rent or buy because of demand. The decade leading up to this (2010 to 2020) saw Montana's population grow by 10% but our housing stock only by 7%. Montana, Idaho and other states that offer closer connection to recreation and natural landscapes have been discovered, including by remote workers and those who retire from higher-priced markets, and local wages simply cannot keep up. High interest rates are eating up buying power, which means that people currently with low-interest rate mortgages are not moving which makes it so there is a lack of movement through the housing continuum."
Davis said the city is working on solutions.
"Adding supply is an important part of addressing the lack of homes affordable to purchase or rent, and we are addressing that in Missoula by updating our Land Use Plan and Development Codes," she said. "The State of Montana addressed that by passing legislation in 2023 to incentivize development of more homes through streamlined regulations."
For much of the last decade and especially during and after the pandemic, Montana has seen an influx of out-of-state buyers .
"Our housing market, however, is beyond simple supply and demand formulas," Davis said. "Because of the external pressures and cost to develop in Montana, we need to put other solutions forward that allow Missoulians to afford to rent and buy. That includes utilizing strategies in our housing policy that can incentivize developers to preserve homes and build new homes affordable to people living, working and retiring here."
With a critical U.S. Senate race between incumbent Democrat Sen. Jon Tester and Republican challenger Tim Sheehy, Montana's housing affordability crisis has also come under the national spotlight.
DJ Smith, a Missoula Realtor and president of the Montana Association of Realtors, recently talked about the issue for CNBC.
"People in Colorado, California, they would sell their homes for over a million dollars and have a lot of equity to purchase here in Montana," Smith told CNBC . "That's led to a record number of 30% of our homes last year being bought with cash."
Bachand, with the Missoula Organization of Realtors, said much work is being done to get more homes on the market. Still, it will take a lot of work for people who live in single-family zone neighborhoods to accept higher density multi-unit dwellings in their area.
"There are promising signs of increased construction and supply, but affordability remains a major challenge," Bachand said. "To address this crisis, Missoula must accelerate the pace of development. A strong public-private partnership is essential to fast-tracking housing projects. The Missoula Organization of Realtors believes that collaboration between city and county leaders, builders, and the community can help solve this shortage. It's also critical for all residents to understand that meaningful change in how we think about density must happen in our backyards."
Bachand said there needs to be more inventory on the market.
"Additionally, according to the National Association of Realtors, incentivizing investors to sell single-family rentals could help bring lower-priced homes to market," he said. "However, many of these investors hold mortgages at rates well below current levels, making it less attractive for them to sell in the near term."
David Erickson is the business reporter for the Missoulian.
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