Vacancy rates in Missoula’s rental market dipped below 1% in the first quarter of 2022 while the median price of a home climbed above $500,000 – both measures punctuating the city’s ongoing housing challenges.
While other cities in the West face similar circumstances, Missoula’s challenges won’t be quickly resolved, experts said on Tuesday. Boil it down and the city needs more homes of all types and across all income levels.
“We realize the numbers are grim, and we’re not happy about the direction they’re heading,” said Mandy Snook, president of the Missoula Organization of Realtors. “There’s not enough housing units for sale or rent. We’re out of balance and in a crisis. The data is clear. We don’t have enough housing.”
According to the Missoula Organization of Realtors annual housing report, the median sales price of a home at the close of 2021 hit $450,000. By the end of the first quarter of 2022, however, it had reached $500,000.
Broken down by type and the median price of a single-family home now stands at $529,000 while a townhome fetches $434,000. The median price of a condo now stands at $347,000.
Last year, the urban area saw just 1,397 residential sales, according to Brint Wahlberg with Windermere Real Estate.
“That’s a 16.3% decrease from where we were the year before,” he said. “It reflects our lowest amount of homes sold since 2015.”
The lack of inventory and the slow pace of development, including the lag between preliminary and final plat approval, continue to challenge the market, experts said. Supply remains at an all-time low with an immediate shortage of 640 homes.
That’s the number of units that are needed today to bring the market back into some semblance of balance. Similar figures would be needed in subsequent years to keep pace with popular and demographic shifts.
Wahlberg added that the limited supply resulted in a nearly 29% increase in the median sales price in 2021. Grant Creek, the Rattlesnake and University Districts remained among the priciest neighborhoods, though others a catching up.
“Among the areas that saw the highest increase in the median sales price last year, the Lower Rattlesnake saw sales prices increase 50.3%, River Road 40.2% and South 39th by 39.2%,” Wahlberg said. “In a market where affordability is an incredible challenge, people are trying to find homes at more affordable price points. For the people looking, there are less options.”
The pinch is also affecting the rental market, which saw vacancy rates dip to below 1% in the first quarter of 2022. A healthy rate is considered 5% to 8%.
Like the housing front, the limited rental supply pushed prices up another 5.6% by the close of 2021. The average rent for a two-bedroom apartment climbed above $1,000 for the first time and now stands at $1,064.
“There’s 6.1% more units this year than last year but unfortunately, it didn’t do anything to decrease our vacancy rates and prices also went up,” said Paul Burrow with Professional Property Management. “Another change, usually two bedrooms are the most popular apartment, but now that’s changed to one bedroom.”
Housing and development experts also lamented the slow pace of development and the slim number of preliminary plats approved for new subdivisions in 2021. Last year, the county approved four projects creating just 11 preliminary lots while the city approved one preliminary plat, that being a multi-family development with seven units.
“There were zero single-family lots created in the City of Missoula through the subdivision process last year,” said Paul Foresting with IMEG. “That’s a dramatic decrease from 538 lots in 2020. We had very little subdivision activity going on last year.”
But there may be signs of optimism on the horizon if the permitting process is any indication. The city last year approved more than 1,300 housing permits – an increase of 141% over the prior year.
Final plats also climbed 193% in both the city and county, creating 349 approved building lots combined – or roughly half of what’s currently needed for a single year.
“It takes on average six years to file a final plat in the city and seven years in the county,” Foresting said while noting the figures are skewed in part by a number of older projects. “But it does tell part of the story. People want to file plats nowadays very quickly. They want to file it as soon as possible. That wasn’t always the case over the last 20 years.”
Changing the status quo will take work on all fronts, Snook said.
“Developers, realtors, builders, and the city and county are all at the table,” she said. “There are plans in place to build thousands of units, but the timeline is not adequate and we need a way to pick up the pace, reduce regulations and increase collaboration from all parties.”