Keila Szpaller, Mar. 4, 2024 - Daily Montanan
In Montana’s second largest city, cash sales made up 32.5% of all residential home sales in 2023, according to a presentation Monday from the Missoula Organization of Realtors.
“That is the highest amount we’ve ever seen,” said Brint Wahlberg, with Windermere Real Estate, in part of the presentation.
The portion of cash sales in Missoula is nearly as high as the national average of 34.1% last September, the highest in almost a decade, according to a Redfin report.
However, Missoula has an oversupply of houses in the $750,000 and $1 million and up ranges, according to the presentation.
More than 100 people attended the 2024 Five Valleys Housing Report panel, which was available in person and remotely. The panel included housing professionals who sell homes and those who work in the affordable housing and rental markets.
At the meeting, the MOR reported another rise in median sales price in Missoula to a record $550,000 in 2023. However, the 5.8% increase has taken place at a slower pace.
Presenters also cited a decrease in volume of nearly 13%, or 952 residential sales in the region, near the floor in 2011 and 2012 following the burst of the housing “bubble.” It’s the third year in a row that volume has dropped.
In the last couple of years, the housing market in many Montana cities has left workers struggling to find homes they can afford, and rising interest rates have exacerbated the problem.
Bozeman has been a poster child of unaffordability, with the median price of a single family home hitting $979,500 in January 2024, or 9% more than one year ago, according to the Bozeman Real Estate Group. In western Montana, the median price in Whitefish is more than $1 million, according to the MOR.
Interest rates remain volatile, according to the presentation about Missoula, but the market also shows signs of becoming more affordable, and many rental units built for people who earn below median income have opened.
Jim McGrath, with the Missoula Housing Authority, said just last year, the city brought on a generation’s worth of affordable housing, 400 units including 30 at the Blue Heron project with intensive case management for homeless individuals who are “the hardest to house.”
A separate presenter said 114 fewer people were in the homelessness management system in 2023 compared to the previous year, and McGrath said a real-time graphic showed the number of people counted in the system start dropping as units opened.
“Last fall, more people left homelessness than became homeless during that period of time. It’s really cool,” McGrath said.
However, McGrath also said increases in rents and the insufficient funding from HUD, the U.S. Department of Housing and Urban Development, means 150 families have been unable to take advantage of a tenant-based voucher program.
(A tenant would pay 30% of their income toward rent, and the voucher would cover the difference, but a 2021 report from the Montana Budget and Policy Center said subsidies are capped, at times below the rate of rent in pricey places such as Missoula.)
An affordability index that compares median price with median income also shows the gap is narrowing some with increases in income, said Matt Gehr, with Mann Mortgage.
On the index, a score of 100 means median cost and income are matched “perfectly,” and in 2022, the index was 51, reflecting unaffordability in the market, Gehr said. In 2023, for someone with a 5% down payment, the index improved to 61.
“On the other hand, most of our improvement has been driven by an increase in median wage within our community,” Gehr said.
In 2022, median household income in Missoula was $80,200, and at the end of 2023, it was more than $100,000, he said. Interest rates are roughly the same as one year ago, but he said they “continue to be defined by volatility.”
The bottom line is a family with a 20% down payment still needs to earn $136,000 to afford the median home, or $30,000 more than the median income, he said.
Julie Pavlish, with Homeword, said newer models in ownership have been helping people get into homes in recent years, including community land trusts; MOR counted about 57 of those new units in 2023.
Pavlish also said a cooperative shared ownership model was used for the first time in 2023 in Missoula. It allowed residents to own a share of the co-op that owns the building where they live.
Resident-owned communities, or manufactured home parks owned and operated jointly by residents, support affordability as well, she said.
“They continue to be a growing share of the market and an important piece for maintaining affordability across our community,” Pavlish said.
ne participant with Summit Independent Living, which helps people who have disabilities, wanted to know how people who earn just $940 from Social Security can qualify for housing programs, which might require higher income.
McGrath, with the Missoula Housing Authority, said people earning at that level need federal vouchers; he said that’s the solution available in this country. However, a federal budget isn’t yet available, and he encouraged people to call their elected officials and ask them to support housing vouchers.
“Say ‘Hey, we need these critical resources,’ because that’s what’s going to deliver to that population,” McGrath said.
Those vouchers can be tied to a housing project or an individual, including ones specifically for people who are disabled, and McGrath said there’s a need for more vouchers and higher value vouchers.
Wahlberg also presented data that showed where buyers looking at Missoula are from, and where Missoulians are looking to buy. He said roughly two-thirds of real estate inquiries are from outside the state.
People from Phoenix and the Mesa area in Arizona accounted for the most inquiries in the last quarter of 2023, and others are from Seattle, Washington, Denver, Colorado, and Los Angeles County, he said. (Asked one participant: Is local outrage over Californians inaccurate? Chuckling could be heard in response.)
But one change this time is people in Billings and Helena also are looking for real estate in Missoula, as opposed to in 2022, when all inquiries were from out of state, he said. When Missoulians search, they look for property in Ravalli County.
Another tidbit, he said, is all the top 10 search areas by people in Missoula were in the state of Montana in 2022, but this year, searches in Spokane County, Washington, popped up, too.
MBPC is a nonprofit organization focused on providing credible and timely research and analysis on budget, tax, and economic issues that impact low- and moderate-income Montana families.