Real Estate and Construction: Housing Markets Lack Inventory.

AuthorBridge, Brandon

The housing market in Montana, while showing strength in many areas, has recently been sending mixed signals. In the first quarter of 2019, home prices experienced their first stutter since 2011, with the state's home price index falling by 4 points (Figure 1). This decrease in the price index came on the heels of the highest 30-year mortgage interest rate spike since 2011.

However, with the interest rate falling in the second quarter of 2019 the home price index rose rapidly, continuing its upward trajectory. According to the most recent data, prices have continued to show strength in the major housing markets across the state. The strongest price appreciations continue to be in Flathead, Missoula and Gallatin counties, with the median sale price in Gallatin County (2018, Montana Department of Revenue) being a record $364,200.

Sales volumes in 2018 showed their first yearly decline since 2011 (Figure 2). While remaining quite high, volumes fell in Flathead, Gallatin, Lewis and Clark, Missoula and Ravalli counties. Flathead County experienced the sharpest decline in volumes, going from 2,153 home sales in 2017 to 1,436 in 2018. Again, these volume reductions coincided with interest rates that climbed steadily throughout 2018, making homes more expensive relative to 2015-17 levels. From November 2018 through September 2019 interest rates fell from close to 5 percent to a low of 3.49 percent, and have been oscillating in that range since.

Despite the reduced volumes and price index, housing markets in the major populated areas of the state continue to be sellers' markets, particularly with starter homes available to first-time buyers.

Table 1 shows the available inventory for selected counties. It shows housing in the number of months supply in the low --and high-price tiers. Generally, a supply of lower than six months indicates a seller's market--meaning that it would take about six months for every listed property to sell if no others were made available to the market. What we see in Table 1 is that in all but Ravalli and Yellowstone counties, homes in the low-price tier are in relatively tight supply.

This is particularly the case in Gallatin County, where according to the most recent...

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