The Missoula Real Estate Blog

Housing Development & Occupancy
A limited supply of real estate listings, low rental vacancy rates, and limited new development (459 units total, a six-year low) in the City of Missoula is resulting in a continued trend of increased real estate prices.
 
Single-family construction projects in the City of Missoula grew in 2019, consistent with the last 10 years. However, building permits for duplexes declined and multi-family construction accounted for 197 units, similar to 2018 but 58% of the 5-year average. Missoula County permits increased slightly, accounting for 228 new units total.
 
The number of residential lots sold in the Missoula urban area declined 16 percent in 2019. The median price of those lots jumped 28.3 percent to $115,500, matching a trend of new construction homes moving into higher price categories.
 
Looking at future development, 45 new residential lots received preliminary approval in both the city and county in 2019. Meanwhile, 104 residential lots attained final plat approvals, making them ready for building in the coming year.
 
In Missoula County, approximately 58 percent of housing units are occupied by their owners. Within the city limits of Missoula, 53 percent of homes (or units) are renter occupied.
 
Population & Income
Missoula County’s population growth rose 1.1 percent in 2018, adding another 1,350 residents. In the last decade, this steady annual increase has resulted in 10,074 more people living in the area. Even with new construction, population growth puts pressure on the already constrained supply of rentals and real estate.
 
Unemployment hit a 20-year low of 3.1 percent in 2019. Missoula’s median income has improved considerably in the last two years of available data, reaching $56,598 in 2018.
 
With both rental and home prices seeing increases in 2019, home availability and affordability remain a considerable challenge for many in Missoula. A large gap exists between the median income of homeowners and that of renters, concurrently homes Missoulians can afford are becoming increasingly limited.
 
The most recent figures on poverty indicate that 13 percent of Missoula County residents live in poverty. During a single point-in-time survey of individuals experiencing homelessness, Missoula counted 367 on a single January night. Meanwhile, Missoula County Public Schools identified 419 children who had unstable housing (either experiencing homelessness or at risk of being homeless) during the 2018-19 school year.
 
Rental Housing
A tight supply of available rentals kept the vacancy rate between 2.3 and 3.7 percent for each quarter of 2019. Houses and duplexes had the tightest supply, with vacancy rates of 2 percent or less, while multiplex rentals had a better supply with a 5.1 percent annual vacancy. Rent prices increased for all types of rentals.
 
The Missoula Housing Authority (MHA) subsidized rent with 774 Section 8 vouchers in 2019, but this does not meet the demand for assistance. In 2019, they had 1,707 households sitting on the Section 8 waiting list in hopes of a voucher. In the last two years, no new rent-restricted homes came online, but MHA and Homeword have plans in the works for new homes, including for those experiencing homelessness.
 
Housing Sales & Prices
In 2019, Missoula recorded its largest increase in the median price of a home in the last decade. The median price of a home rose 8.6 percent to $315,000. The number of homes sold matched the brisk pace of the previous two years, with 1,504 sales. Data shows that home values continue to have strong appreciation in Missoula.
 
The market continued to experience a shrinking availability of homes at lower price points. Sales increased for all price points above $275,000, and homes of $500,000 or more had a 43-percent increase in sales. These changes have led to an under-supply of homes under $350,000.
 
Condominium and townhouse sales remained vigorous in 2019, which is no surprise given that their prices are often lower than a single-family starter home.
 
Housing Finance
While homebuyers may have been challenged by rising home prices in 2019, mortgage rates dropped after the Federal Reserve made a series of cuts to the fed funds rate. For the last seven months of 2019, 30-year conventional mortgage rates stayed below 4 percent.
 
Seventy percent of 2019 home sales were financed via conventional mortgages and 17 percent were cash sales, with the remaining a combination of other programs and options.
 
Rising prices mean higher down payments, but Missoula borrowers do have access to a variety of down payment assistance programs, as well as homebuyer and financial education. The financial health of the Missoula homeowner has been on the upswing for several years, with just 14 net foreclosures declared in 2019—a far cry from 2009’s 262 net foreclosures.
 
Housing Affordability
The median income of Missoula’s homeowners has increased considerably in the last few years, rising to $75,368 in 2018, with only 21 percent spending 30 percent or more of their income on housing costs.
 
The median income of Missoula renters sits at $37,538, and 48.2 percent of renters spend 30 percent or more of their income on housing—making them cost-burdened by definition.
 
To purchase a median-priced home of $315,000 in 2019, you would need an income of $98,123 (and a 5-percent down payment on a 30-yr conventional loan) to afford that home. Meanwhile, the actual median income for a 2-person household was $58,688. That disparity in real estate prices and income led to the 2019 Housing Affordability Index once again declining, indicating that a median-income household could not afford a median-priced home in Missoula.

 
Download the 2020 Missoula Housing Report

Housing Development & Occupancy
Despite a growing population, a tight supply of real estate and a relatively tight rental market, construction did not increase in Missoula in 2018.
 
Multi-family unit construction, which had enjoyed significant increases from 2016 to 2017, suddenly dropped in 2018. Within the City of Missoula, permits for new multi-family units declined 64 percent, while county permits dropped 48 percent. However, duplex permits increased and single-family permits remained relatively level.
 
Residential lot sales remained the same in 2018 as they were in 2017, with 169 lots sold. The median price was $90,000.
 
Several large, previously approved subdivisions completed development phases in 2018, raising the total number of subdivision lots that had received final approval and were ready for building up to 322. However, only 18 residential lots entered the first stage of preliminary plat approval, none of them within the city.
 
In the City of Missoula, about 46 percent of housing units are occupied by their owners; in Missoula County owners occupy approximately 58 percent of the units.
 
Population & Income
Missoula County continued to grow, adding another 1,311 residents between 2016 and 2017. While most of that growth is owed to more people moving to Missoula than moving away, net migration did see a slight decrease in 2017. Even with new rentals and single-family homes being added to the market, a growing population kept the markets for both in tight supply.
 
Economically, Missoula experienced significant improvements, although they didn’t transfer to all demographics. Unemployment reached a low of 3.8 percent in 2018, and the 2017 median income in Missoula County increased 17 percent, to $54,311. Homeowners also saw a large jump in their median income, to $75,940. Conversely, the median income for renters declined 4 percent, to $29,793. Such disparity, coupled with rising real estate prices, illustrates the difficulty many residents have in affording real estate as well as rentals.
 
As has been the case for several years, about 15 percent of Missoulians live in poverty. While the number of homeless individuals identified by a single point-in-time survey declined to 319 in January 2018, an estimated 500 children were homeless or in unstable housing during the 2017-18 school year, according to the Missoula County Public Schools.
 
Rental Housing
Missoula recorded an annual vacancy rate of 3.9 percent in 2018, which is slightly above recent years but still considered a tight rental market. Multiplexes saw a bigger increase in vacancy rates thanks to new units coming on line, but homes and duplexes had vacancy rates of 2 percent or less. Overall, rental prices declined 1.55 percent in 2018, giving renters some relief.
 
The Missoula Housing Authority (MHA) provided 774 Section 8 vouchers to subsidize rent, but it didn’t come close to meeting the demand for such assistance. With 1,777 households on their Section 8 waiting list (up 8.5 percent from 2017), it’s clear that there isn’t enough affordable housing. No new affordable housing units were added in 2018, but MHA plans to bring on 200 new units in 2020.
 
Housing Sales & Prices
The pace of home sales remained brisk in 2018 but did decline by 3.8 percent, with 1,482 homes sold. The median price of a home rose 8.1 percent, to $290,000, while that of a newly constructed singlefamily home rose 26 percent to $383,500. The largest portion of sales (32.6 percent) occurred in the $200,000 to $275,000 range, and homes over $275,000 all saw an increase in number of sales. Sales of condominiums and townhouses also kept pace, though a decline in newly constructed condominiums did cause overall condo/townhouse sales to drop by 9.6 percent in 2018.
 
The market continued its trend of having a tight supply, and competition among buyers likely contributed to rising prices. Homes under $350,000 were typically in under-supply throughout 2018.
 
Housing Finance
Home buying became more of a challenge for many would-be buyers in 2018. Higher mortgage rates drove up borrowing costs, and the cost of construction created financing issues for those looking to build. Foreclosures, however, remained low in 2018.
 
Missoula homebuyers have continued access to a number of down-payment assistance programs, as well as homebuyer and financial education. However, with such a tight supply of homes at affordable price points many buyers are unable to afford to purchase a home even with down payment assistance programs.
 
Housing Affordability
Housing affordability remains a challenge for both renters and prospective homebuyers. As the median price of a home continued to increase, the Missoula Housing Affordability Index declined. To purchase a $290,000 home in 2018 with a 5-percent down payment, a family would have needed an income of at least $95,731 to have it considered affordable.
 
While the percentage of homeowners spending a worrisome portion of their income on housing decreased to 22 percent in Missoula, according to the most recent 2017 data, the number of renters spending more than 30 percent of their income on housing increased, reaching almost 49 percent.

 
Download the 2019 Missoula Housing Report