Housing prices continue to behave like a runaway helium balloon in the Garden City, while wages behave like a child on the ground with hands toward the sky, watching as the gap gets larger.
Missoula’s median home sales price soared to a record high of $315,000 in 2019, a jump of 8.62% from the 2018 price of $290,000. Since 2010, when it was at $200,500, Missoula’s median home sales price has increased by 57.1%.
“Same story, it just keeps going up,” said Brint Wahlberg of Windermere Real Estate. “It really is one of those things where we keep looking at supply. There’s a lack of options. When the right option comes out, you’ve got to get aggressive, so that sale hits a new benchmark in the neighborhood. Then the neighbors notice that new benchmark and notch it up a little higher and away it goes.”
The number is the median sales price of all 1,408 homes sold in the Missoula Urban Area last year, and comes from the Missoula Organization of Realtors. When the 90 homes sold in Lolo last year are included, the median sales price last year is unchanged. The median sales price has risen by 38% in the urban area since 2014.
In the entire county, 1,735 homes were sold last year and the median sales price was $315,500.
The median home sales price is just the final sales price of homes that were sold, and is not the same as the assessed market value of a home, which the state determines and uses to assess property taxes. In recent years, homes in Missoula often sell for much more than their assessed market value.
Wahlberg noted that in previous years, Missoula had an “oversupply” of houses selling for $500,000 or more. In December 2019, there was a normal supply of those high-end homes.
“What that probably means is people who have the means to move up are doing it, so 'up-buyer' activity is a little stronger than before,” he explained.
In 2017, President Donald Trump and Republicans in Congress passed a $1.5 trillion tax cut bill. According to the nonpartisan Tax Policy Center, more than 60% of the tax savings went to people in the top 20% of the income ladder.
Andrea Davis, the executive director of the nonprofit Homeword in Missoula, said her organization is working on building 202 affordable housing units in Missoula, called the Trinity Housing Development, in partnership with the City of Missoula, Missoula County and other organizations.
However, she said, Missoula’s home prices are out of reach for many community members.
“It might seem like the housing market is doing great and the economy is doing great, but it’s not for everybody and it’s not for the majority of people,” she said.
Building low-cost housing is a challenge, she said.
“It’s a quandary because the cost of development is at an all-time high, and that includes construction and labor and materials. We see contractors not building entry-level homes or homes that people earning a median income can afford.”
Davis noted that a person or a family would need an income of around $100,000 a year to afford a median-priced home in Missoula. However, the median wage for a single person is $51,400. For two people it’s $58,700, and for a family of four it's $73,300. The area median income is used, among other things, to determine who qualifies for affordable housing or not.
“We have seen a median income increase the last few years, because it was down at $43,000 for a single person a few years ago, but it’s just coming from census data and it’s not necessarily earned wages,” Davis noted. “It could be wealth in other ways, like stock dividends. It’s a tricky data point. We all work from that common denominator, but it could be argued it doesn’t capture everyday people’s earned wages.”
You have free articles remaining.
Lori Davidson, the executive director of the Missoula Housing Authority, said 1,183 low-income people in Missoula are on a waiting list to get federal vouchers that subsidize their rent.
"But this is right after we've completed the annual update when it's the lowest," she said. "It will start creeping up again."
Wahlberg said that the amount of large-scale, multifamily housing construction projects fell off in 2019.
“That’s probably because we built a whole ton in the previous few years,” he said. “So I bet the availability of rentals, when it comes to higher-dollar, multi-unit rental buildings, is a little tighter than before. That suggests a little bit of a trend of people deciding to look at purchasing, so that bumps up activity.”
Wahlberg said Missoula needs to find a way to encourage more development.
Only 200 residential projects were permitted in Missoula in the first half of 2019, a pace that equates to about 400 for the year, compared to 775 for the entire years of both 2016 and 2017.
“We need to provide more housing, and we can do that in a couple ways, with subdivisions and building and growing and expanding, but we also need to work on getting property managers with held rental investments, especially single-family homes, to sell and move that money into other projects and make those homes available for purchase and rent,” he said.
Wahlberg noted that there are large subdivision projects planned for the Mullan Road corridor, and the Opportunity Zone in Missoula provides a way for people to realize capital gains tax breaks that give them incentives to sell real estate.
“Correcting supply in a market is like steering a great big ship,” he said. “It doesn’t turn very fast. There are small signs here and there, but nothing fixes itself overnight so we’re going to keep seeing these sharp median price gains.”
Davis said her organization is offering more homebuyer education classes in January to meet demand. She’s noticed that the median income of people who take the classes has risen a bit, suggesting people who didn’t have problems purchasing housing in the past are now seeking guidance.
“We do hope people are not self-selecting out of taking a class because of the inability to find a home,” she said.
Mike Nugent, a real estate agent with Berkshire Hathaway HomeServices, said buyers in Missoula comprise both out-of-towners and locals.
“It’s a mix,” he said. “We definitely have people coming in from other areas and there’s also a lot of people moving up. One of the things we’re running into is there’s not necessarily a lot of inventory for people who want to make a change, either downsizing or moving up, so that’s one of the problems we’ve had.”
Nugent said buyers are looking for housing of all price points in Missoula, so that means everything from higher-end homes to affordable apartments are needed. That’s because wealthier buyers are snapping up homes that working-class people would usually buy because there’s nothing else out there.
“We need to take an ‘all of the above’ approach to increasing our housing stock,” he said.