By Paul Forsting, AICP
As Montana and the rest of the country move forward with loosening stay-at-home orders, it’s important to consider general housing development in Montana and how many Montanans are still looking for the safety and confidence a home purchase can bring.
The state’s housing development isn’t entirely uniform, with more populated places like Missoula and Bozeman seeing high demand, while that same demand might not exist in areas with fewer residents.
Recently, the Missoula Organization of Realtors (MOR) released its 2020 housing report, which gives us an idea of the supply and demand needs for housing and updates on average prices, lot sizes, and more on the development side of the equation.
The data used in the report is all pre-COVID-19, so there are very likely some changes in consumer and agency behavior as we move forward. However, the overall picture is similar to what we’ve seen over the last couple of years: high demand for housing, an emphasis on affordability (and attainability), and a supply side that is trying hard to keep up.
The report shows that permitting and entitlement have slowed down despite the demand over the last two years. There are several reasons behind that, including the addition of new regulations and an escalation of standards to which housing developments are held.
A key takeaway here is that despite the data showing that permits are down in some places, this one data point does not represent an accurate picture of development demand in Montana and Missoula, in particular. Pre-pandemic, the demand was still high, especially for multi-family housing, even if the supply didn’t meet it.
One way to know this is to look at our rental vacancy rates, which measure how many rentable units are available and how many are occupied. We saw rates between 2.3% and 3.7%, indicating a tight market, especially for single-family homes and duplexes.
In Missoula County, single-family housing increased nearly 15%, while duplex permit applications dropped, and multi-family housing stayed relatively consistent with 2018 at 197 units. That number is down significantly from the growth in 2017, however.
A tight supply means increased prices in the state’s most populated places, which we also saw in 2019 – the median home value in Bozeman, according to the 2020 Economic Report from the University of Montana’s Bureau of Business and Economic Research, climbed to $440,200. But mortgage rates stayed low, and economists predict they’ll remain that way through 2020.
Overall, the state showed growth in the largest markets, but that was before the COVID-19 pandemic and shutdowns completely disrupted our economy and lives. While we can’t say if the pandemic will negatively affect supply and demand for housing, it’s a pretty safe bet to say we’ll see ripple effects as unemployment spikes.
And while we continue to wander through these uncertain times, I’m comforted by the relationships I’ve built with those in the housing industry and relevant government agencies over the years. If we all work together, I’m confident we can find a more recognizable normal in the future.
Paul served on the coordinating committee for the compilation of the 2020 Missoula Housing Report, representing the voice of developers and the building industry. The full report can be viewed by clicking here.