By Sam Sill
It is no secret that Missoula offers an amazing quality of life. With all the beauty and opportunity surrounding us, it is unfortunate that the cost of living, especially the cost of housing, challenges many households.
The Missoula Organization of REALTORS® closely monitors the housing market. Each year, we issue a report of housing market trends. Throughout 2016, representatives of MOR have sounded the alarm that Missoula’s home prices are rapidly increasing. The median sales price of a home in 2015 was $238,700, an all-time high.
To afford a home at this price, a family needs an annual income of more than $80,000. However, Missoula’s median household income at that time was only $47,209. Renters faced even greater difficulty with a median household income of only $27,606.
The median sales price for a home in 2016 will be significantly higher – through the end of September, the year-to-date median sales price increased to $255,150. The gap between home prices and incomes contributes to the fact that less than half of Missoula families own a home.
As has been the trend for the last several years, average rents increased in nearly every category in 2015. Nearly half of all Missoula renters spent an inadvisable 30% or more of their income on housing.
What happens when housing is no longer affordable? In short, Missoula becomes a community that is less economically viable and less inclusive.
Businesses need skilled and educated workers, and many employers say finding them is their biggest challenge. When housing is no longer affordable, greater numbers of skilled and educated workers will choose more affordable communities over Missoula. This will hurt Missoula’s ability to attract new businesses, and retain and grow our existing businesses. If this trend continues, we will be left with sky-high home prices and an economy based primarily on low wage, low skill service industry jobs. Missoula will become a less diverse, less inclusive community if good paying jobs are scarce and housing is out of reach for recent graduates and working families.
The harm that this lack of affordability visits upon the private sector will be felt by the public sector too. Our local governments, schools, and non-profits help maintain Missoula’s quality of life through the generous support of the business community. If aid from the private sector is diminished, as we saw during the recession, public sector organizations will be less effective in carrying out their missions, leading to a lower community quality of life.
We must ask ourselves – is this the future we want?
The rapid increase in the cost of Missoula homes is partly because supply has struggled to keep up with demand over the last few years. Typically, a supply sufficient to meet six months of demand indicates a balanced market. By the end of September 2016, there were only enough homes listed for sale across all price points to meet roughly three months of demand. Though there was a recent uptick in residential construction, there are still far too few new homes being built to meaningfully impact prices.
We believe a key piece of addressing the affordability issue is to determine why the supply of homes is not keeping up with demand. While Missoula’s location in a mountain valley provides constraints, the scarcity of land is only one of many challenges. We need to identify all of the significant barriers to developing housing affordable for working people, and we need to find solutions that the community can work together to implement.
The Missoula Organization of REALTORS® has proposed a study to do just that. We have identified an experienced professional consultant, and are forming partnerships with both private and public sector organizations as the planning phase begins. We are committed to a framework that gives partners meaningful opportunities for participation throughout the planning and execution of the study. This is critical because the housing affordability issue is a community problem, and addressing it will require the community to work together towards solutions.
We are excited by the amount of interest we are hearing, and we look forward to the next steps of this important effort.