With supply lacking and demand climbing, Missoula housing hits $425K average in Q1
The median price of a home in Missoula increased 20% in the first quarter of 2021, continuing an upward trend that already had jumped 11% last year to what was a record high of $350,000.
Five months into 2021 and the median price for all housing types now stands at $425,000 – a figure largely driven by demand and Missoula's acute lack of supply.
“All neighborhoods experienced a median price increase,” said Brint Wahlberg, a member of the Missoula Organization of Realtor's coordinating committee. “Last year was the highest sales volume on record.”
Based upon data released Wednesday by MOR and its 2021 housing report, the current supply of housing in Missoula stands at just three weeks. A healthy market ranges between three and nine months.
The tight supply plays large into pricing and sales, which also reached a new high in 2020. While that's good for those selling a home, it can pose challenges to those looking to buy, often resulting in a bidding war.
“Buyers are paying at or over asking price,” Wahlberg said. “When you move into an under supply situation, then we see what we're seeing – rapidly rising median sales prices. The sales volume of property's $150,000 and under practically don't exist anymore.”
In 2006, nearly 140 homes sold below that $150,000 threshold while in 2020, only five homes sold in that range. At the same time, in 2006, around 216 homes sold between $300,000 and $450,000 while last year, that had climbed to 644 homes.
Properties in that range now represent the largest sector of home sales by volume across the various price categories. Homes priced below $300,000 are growing scarce while homes priced between $450,000 and $600,000 represent a growing sector.
“The $150,000 to $300,000 market is now starting to shrink,” Wahlberg said. “That $300,000 to $450,000 has now become the largest segment of our market in terms of sales activity.”
Rattlesnake and Grant Creek remain the priciest neighborhoods, where the median price of a home stands at $600,000 and up. In comparison, the Northside and Central Missoula represent the most affordable areas, with a median price at around $320,000.
“Conventional financing remains king in terms of sales,” Wahlberg said. “Cash sales did jump up at the end of Quarter One, accounting for 20% of our sales.”
Realtors present on Wednesday said they haven't noticed a change in the number of out-of-state buyers. Those who do come from out of state are often returning home to a job, they said.
According to this year's data, just 12.9% of home purchases in Missoula in 2019 were made by an out-of-state buyer. In 2020 during the pandemic, it increased slightly to 18%.
The pent up demand for housing has moved the development community to action, resulting in an increase in preliminary lots created through the subdivision process.
Between 2014 and 2019, only 45 lots had been created in the city through the subdivision process. But last year that figure jumped to 538 preliminary lots.
Yet experts on Wednesday said it could take time to bring those lots to the market, especially as infrastructure and material costs climb. Data also suggests that it takes 50 months on average to move a project through city approval and 87 months when seeking county approval.
To address the challenge of supply, timing and the pricing that comes with it, the real estate industry is working with the city and county to create a single record of all development work, along with enhanced data reporting to help project future supply.
“Our goal is to help track progress towards achieving a healthy supply of attainable housing at all price points,” said MOR President Shannon Hillard. “We're working with all of our public and private partners to perform the ongoing work of identifying, debating and implementing solutions.”
The Missoula Current will follow up with a more detailed look at the market's nuances in the days to come.