Housing prices in Missoula, Mont., saw their largest one-year increase of the last decade, an 8.6% jump, due mainly to a lack of inventory. That has led to a continuation of the seller's market seen here for much of the last decade.
The median home sales price in Missoula hit a record $315,000 in 2019, according to Brint Wahlberg, a local Realtor with Windermere Real Estate. He and other experts presented the Missoula Organization of Realtors' 2020 Missoula Housing Report via video conference on Thursday.
"It's the largest median price increase we've had in one single year (over the last decade)," Wahlberg said.
Since 2010, when it was at $200,500, Missoula's median home sales price has increased by 57.1%.
There were 1,504 residential sales in 2019, up just 22 from 2018.
"A lack of supply has kept a lid on Missoula's market potential," Wahlberg explained. "For a good portion of the year in 2019, our housing supply was under the normal range. That means in a lot of situations for buyers they were finding very competitive situations, multiple offers, homes being bid up over ask, fast sales."
Wahlberg said that one of the biggest contributing factors to the 8.6% price hike was that buyers had to go up to a higher price point to get a home.
"We have data that shows this," he said.
The Multiple Listing Service records the final sales prices compared to the original list price, and in Missoula sellers have been getting between 98% and 99% of their asking price on average for the past two years.
"Of course this is good news if you're a home seller," he said. "If you're selling, you're looking at a situation where you have the advantage and quite a few buyers are looking at your property."
It is, in fact, a seller's market in Missoula, he noted.
"There's not enough supply to meet demand, even during a pandemic," he said. "What's fascinating is while we're in the midst of staying home, there's a lot of activity. So more listings will be met positively by buyers wanting to buy."
The neighborhoods with the most sales volumes were Mullan/Expressway and central Missoula. The neighborhoods with the highest prices were the Rattlesnake, Grant Creek and Miller Creek, respectively.
Paul Burow with Professional Property Management said multi-family building permits have declined significantly over the last few years, even below the levels of 2015 before the building boom.
"This creates a lot of vacancy rate pressure, which is down to 3.1%," he said. "The problem with a low vacancy rate is it does significantly increase the cost of rent for folks."
The average cost of rent has increased significantly every year in Missoula County since 2011, from about $750 that year to nearly $825 in 2019.
Burow said they surveyed property managers and found that rents were only being raised between zero and 5% every year, which didn't account for the rent price increases.
"What we're seeing is pretty much an evaporation of lower-end affordable units," Burow explained. "With new construction coming online, it's not unheard of for a new one-bedroom to be $900 (per month) or a two-bedroom to be $1,100. Existing units aren't having huge price increases. It's new construction raising the overall average."
He said Missoula County's rents are significantly higher than the statewide average, but the state is slowly closing the gap.
Lynn Stenerson with Stockman Bank said historically low mortgage interest rates have helped drive a surge in refinance applications and have made buying more attractive.
Brandon Bridge, an economist with the Bureau of Business and Economic Research at the University of Montana, said Missoula's population growth rate has slowed a little in recent years, but the county is still adding about 1,200 people a year.
Jim McGrath with the Missoula Housing Authority said compared to 2018, renter income increased 26% to a median of $37,538 in 2019.
"Renter incomes increased dramatically," he said. "That should be good news."
But, he said, if one analyzes Missoula's cost-burdened households (those homes paying more than 30% of income on rent or mortgage), there's a stark difference between homeowners and renters.
"We do see almost half of renters are still cost-burdened," he said.
There were zero new Section 8 housing units built for low-income people in 2019, he said, but the MHA is currently constructing 12 units for homeless people and 402 units are expected to come online in the next few years. A point-in-time survey last year showed 367 homeless people in the third week of January, and this year that number was down 15% to 311. The number of homeless and at-risk-of-becoming-homeless youth in Missoula County schools went from 500 in 2018 to 419 in 2019.
"That's still a large number," McGrath said.
Wahlberg said the Housing Affordability Index, which measures the ability of a family earning median income to purchase a median-priced home, is fairly dismal in Missoula.
With the median income for a single person in Missoula County at $51,375, the Affordability Index is at 67 for a single person, whereas a value of 100 means that person could afford a median-priced home.
"The housing affordability index has been trending down for the last decade and is way below 100%," Wahlberg said.
Paul Forsting, a planner in Missoula, said the pace of housing development has declined dramatically over the last two years.
In 2019, there were only 459 new housing units built, which is four below 2018 and way down from the 775 achieved in both 2017 and 2016.
"We've dropped off in the magnitude of over 300 units," Forsting said. "It's almost entirely in the multifamily sector."
Single-family home construction has been stable, he noted. And almost two-thirds of building permits in the county have been inside city limits.
Wahlberg said that due to a strong February, the pace of home sales in 2020 is 6.77% above where it was by this time in 2019. Wahlberg also said that new high-end condos have been a strong part of the Missoula real estate market. The median sales price of new condos in Missoula last year was $380,000.
