East Missoula 1

Al Zepeda talks in the winter of 2018 about his East Village apartment complex and his other building projects in East Missoula. Zepeda now plans to build roughly 200 housing units in Lolo.

Longtime western Montana residents won’t be shocked to learn that, according to Internal Revenue Service data, people who move here often have higher wages than the people who leave.

Since 1993, the average person moving into Missoula County has reported $1,900 more in income than the average person who leaves the county. In Ravalli County, the average newcomer reports $4,200 more in income and that number is $4,800 in Flathead County. In places like Lewis and Clark County and Cascade County, people who leave make about $500 more.

The Internal Revenue Service has a database that tracks when people file their returns in different places after moving. Economist Brandon Bridge at the University of Montana’s Bureau of Business and Economic Research then linked that data with the incomes reported by people moving here and people leaving.

He found that between 2002 and 2006, newcomers to Missoula brought a combined total of $63 million more in income than people leaving. And in the years following the Great Recession between 2010 and 2016, newcomers brought $113 million more in income.

Census data shows that Missoula County’s population increased by 9 percent from 2008 to 2017 to a total of about 117,000.

And IRS data shows that 59 percent of newcomers to Missoula County were from out of state, mostly the western United States, while 41 percent came from within Montana.

Bridge says the data showing people with higher incomes moving here can partly explain why Missoula’s housing prices have skyrocketed 39 percent in the last 10 years.

“You have more people coming in than are leaving and those people happen to be making more money,” he said. “And they’re chasing the same houses. So that’s definitely going to drive prices up for sure.”

The average number of building permits for housing units in Missoula County has been steady at about 630 per year between 2000 and 2018, despite population increases every year.

In fact, local real estate agent Paul Burrow said that if it weren’t for the University of Montana’s steep enrollment decline this decade, housing prices in Missoula would be even more astronomical.

“If we hadn’t seen that we would probably be in big trouble,” he said, speaking at the Missoula Organization of Realtor’s annual housing report on Thursday.

The University of Montana has lost 32 percent of its students since 2011, meaning several thousand students that were occupying housing in the first part of this decade are no longer here. Missoula’s strong economy, with tech companies like ClassPass and Cognizant ATG going on hiring sprees, has created a strong demand for housing. If combined with enrollment records like that seen at Montana State University recently, Missoula’s housing prices might look like Bozeman, where housing prices jumped 20 percent in just 2018.

Missoula's housing prices, by comparison, rose 8.1 percent in 2018 to a record high of $290,000.

Bridge said there is rising risk in the real estate market, much like there was during the housing bubble that partly caused the Great Recession. People with poorer credit scores are increasingly being qualified to purchase homes, debt-to-income ratios are rising and people are being qualified to purchase homes they cannot afford.

Lynn Stenerson, a home loan lender at Stockman Bank in Missoula, said interest rates rose in 2018. That made it more difficult for prospective homebuyers because it makes the cost of purchasing a home go up. However, interest rates crept down at the end of the year to the low 4 percent range, she said.

"The outlook from the Federal Reserve is possibly no rate hikes in 2019, so that should spur people out looking," she said.

However, affordability continues to be an issue in Missoula. According to the Missoula Organization of Realtors, a three-person family would need to have an income of $95,731 and a 5 percent down payment of $14,500 just to afford a median priced home listed at $290,000 in Missoula County. However, the median family income for a three-person household in the county is just $63,400.

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