Missoula housing prices on pace to see largest jump since 2004

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Housing prices in the Missoula, Mont., area have risen tremendously since January and are on pace to see the largest annual spike in well over a decade.

According to Brint Wahlberg, a local real estate agent who also helps with statistics for the Missoula Organization of Realtors, the median sales price of all homes sold in the area between Jan. 1 and Oct. 31 of this year was a record $290,900.

That's an 8.1% increase over the same time period last year, when the median sales price was $269,000. Unless there's a dramatic decrease in prices in November and December, 2018 will see the largest year-over-year percentage increase in sales prices since 2004. The median sales price in Missoula for the entire year of 2017 was $268,250, a jump of 5.2% from 2016.

The data represent roughly 1,200 homes sold in Missoula and surrounding communities such as Lolo, Bonner, East Missoula, Clinton and Mullan Road. The median sales price for the entire county through Oct. 31 was $293,500, an 8.7% over the same time period last year.

The largest percentage increase in home sales prices this century in Missoula occurred from 2003 to 2004, when prices jumped 8.9%.

Wahlberg said this year's increase is dramatic but still less than what he was expecting.

"It's a big jump," he said. "Supply issues pushed it. But I was bracing for north of $300,000."

Wahlberg said he also doesn't expect the price increases to continue as prospective buyers start to sit out the craziness.

"My gut feel is our supply issue isn't fixed, prices are still going to go up, but I would assume that the amount of large-chunk median gains we've seen since 2013 is going to slow down," he explained. "This is just a guess, but based on the fall market, if interest rates stay around 5%, we're going to start seeing a point where people are going to say they're not going to pay that price."

The housing price bubble and subsequent crash of 2008-2011 is still fresh in people's minds, Wahlberg said, and the recent price increases of nearly 40% since 2010 are a reminder that the old adage of "what goes up must come down" often applies to real estate prices.

"We had a housing bubble that burst 10 years ago, and most people around here remember that time," he said. "People are approaching it as 'We saw what happened 10 years ago,' and playing it cool and waiting to see how things go."

Housing prices dropped 9% in Missoula between 2008 and 2010 then slowly began to rise again.

Wahlberg doesn't expect another crash, but he does believe the price increases will flatten out.

"I don't think we're going to see a big deflation like [the housing price crash] again, but we've been gaining 4%-5% annually," he explained. "In the next couple years I think it will be more like 2%-3% as a little bit of a leveling force. More people are not going to pay the prices. They'll wait to see what happens."

Sales volume, the number of homes sold, has decreased about 5% from last year, Wahlberg noted.

That's caused by "kind of a mix of a couple things," he said. "In a market with a supply crunch like we have for such a long time, people get weird. People drop back and wait until this market corrects. What also happens is as prices keep going up and up, people keep getting priced out of the market they want to be in or the neighborhoods or school districts they want to be in."

Wahlberg said interest rates, dictated by the Federal Reserve, have also risen this year. That means it costs more to borrow money than it did last year.

"Interest rates rose over 5% last month and dropped back a little bit over the last week, but over the last 18 months rates have gone up," he said.

Building costs, driven by a lack of skilled workers and tariffs on building materials, have also skyrocketed.

"People looking to build houses that cost $400,000 three or four years ago, it's $575,000 now," Wahlberg said. "And that's for the same finish work, the same crews, the same builder. And it's the same profit margin for the builder. There's just higher labor costs."

The Missoula Organization of Realtors' website lists the year-to-date median sales price for the Missoula Urban Area as $298,000, which would mean home prices have jumped 10.7% over the same time period last year. However, Wahlberg said there's a little bit of confusion with the MOR's definition of Missoula Urban Area this year, but said his definition is the one the MOR's annual report used in years past.

Melissa Mooney, the president of the MOR, could not be reached for comment on Monday.

High prices in Missoula don't mean things are any better for buyers south of here.

In Ravalli County, the median sales price also hit a record high this year of $272,750, according to the Ravalli Republic newspaper.

Bessie Evans of ERA Lambros Real Estate sells mostly in the Florence market, just south of the Missoula County border.

"We definitely have a lack of inventory in affordable homes," she said. "If a young family came to Florence because they like the school and said they could only afford a $250,000 home, I wouldn't be able to find them a home."

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