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How Rising Home Prices & Growing Wages Relate to Desirability in Montana

by Hart Real Estate Solutions

Montana housing market prices are high, especially in Bozeman. In 2016, the median sale price for a single-family home in Bozeman was $359,250. Fast forward one year— the median sale price in Bozeman in 2017 was $380,750 (a 5.98% increase from the previous year).      

This data was pulled from the Big Sky Country MLS for 2018. While we attempt to provide reliable, useful information, we cannot guarantee that the information is accurate, current or suitable for any particular purpose. Estimates are subject to change without notice.

 

In terms of median home values, Bozeman ranked the highest when compared to both other large cities in the state and the United States as a whole.

 

Median Home Values 

Although wages in Montana remain lower than the U.S. average, they are growing faster than other areas across the country. In 2000, the average weekly wage in Montana was 69% of the U.S. level— by 2016, they had grown to 76% of the U.S. level. Quickly growing wages could be a contributing factor to the ever-increasing demand for housing in Montana (and Bozeman in particular), although the demand for quality of life is likely the largest reason for the high demand and rapidly growing population. While the median household income in Bozeman is currently $68,000 (keeping pace with the current median home price), this statistic doesn’t account for the quality of the housing that is available at this price.

Many of the people coming to Bozeman are not reliant on Montana’s economy for income. This group of people includes out-of-state residents who own a second home in Montana, telecommuters, and retirees. In 2010, the share of second homes in Montana was 8%, while the U.S. percentage was only 3.5%. Our state also attracts a large number of people who have the financial means to live wherever they choose—23% of Montana’s personal income comes from non-wage sources such as dividends and retirement. The U.S. level is only 19%. In Gallatin County, more than 40% of adjusted gross income comes from non-wage sources.

Because of the high quality of life in Montana, rising housing costs are partially related to the state’s desirability to those whose income isn’t related to Montana’s economy, which means that wage increases may not be as tied to housing cost increases as we previously thought.

With Bozeman’s population expected to hit 50,000 by the 2020 census, wages growing relatively quickly, and home prices continually on the rise, when will our local market start to become more balanced? With new construction expected to rise as we move closer to that 50,000 mark and potential inventory growth predicted countrywide by the fall, we may be moving closer to both a more balanced market and more affordable housing than we think. 

This month, we will compare single family home sales in the Gallatin Valley through April 2016 to last year’s home sales and help reveal trends in the market. Here are a few stats:

  • 2016 sales are currently projected to drop by 21.62% (1,485 in 2015, 388 through April, projected to 1,164 sales in 2016)
  • Dollar volume is projected to drop by 24.05% ($663,572,593 in 2015, $167,993,026 through April, projected to 503,979,078 in 2016)
  • Currently, homes are moving slightly faster than last year, staying on the market 2.06% shorter than 2015 (97 days on the market in 2015, 95 days on the market in 2016)

Summary: The 2016 housing market has moved slower than in 2015, at least through the first 4 months. Home buyers and sellers alike should keep in mind that the most active time periods, those over the summer and fall, tend to see the highest activity. So although simple projections suggest the market might be slowing, a fast summer could easily reverse this trend. The market remains very healthy—growth continues—and small home inventory has kept the market fast paced. 

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