BOZEMAN— Montana’s affordable housing crisis can be highlighted by one stark statistic: approximately 80% of mortgage holders in the state have rates that are 2% to 3% below current mortgage rates. This situation discourages property owners from moving, as new mortgages would significantly increase monthly payments even for comparable homes. Consequently, Montana’s housing market is effectively stalled.
Rising home prices have more than doubled the median cost in many Montana cities over the past decade, making it difficult for current homeowners to find affordable housing options. “Like many of you, I couldn’t afford my own home,” said Missoula Mayor Andrea Davis, highlighting the widespread impact of this crisis.
The housing market issues are affecting unexpected groups. The University of Montana law school, for instance, could not hire its top choice for dean as the six-figure salary wasn’t sufficient for housing. Benjamin Horowitz from the Minneapolis Federal Reserve Bank noted, “This is a concern everywhere,” and linked housing issues to broader economic development challenges, including job mobility and community growth.
Montana’s housing problems are exacerbated by a mismatch in production and demand. Horowitz explained, “Montana sees a lack of production relative to demand,” with more people moving to the state without enough housing, driving prices higher. The COVID-19 pandemic worsened the situation, as Montana’s housing growth lagged behind its population increase.
Despite a net negative population replacement rate, Montana’s population continues to grow due to in-migration, ranking fifth nationally in domestic migration. Horowitz noted that competition for housing primarily comes from within the state, not out-of-state buyers, which contradicts common narratives.
Unlike neighboring states where population growth is concentrated in specific areas, Montana’s housing demand spans the entire state. This widespread demand has led to historically low affordability in all metro regions. Most Montanans with mortgages benefit from rates below current levels, preventing market fluidity and halting the cycle of moving to larger homes.
Montana faces a significant housing unit gap, requiring three years of continuous building at the current pace to meet existing demand. The housing shortage impacts both potential buyers and sellers, with 66% of homeowners having mortgage rates of 4% or less, making moving financially unfeasible.
Learn more about Benjamin Horowitz’s analysis on Montana’s housing market.
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