The skyrocketing prices of homes in Missoula this year have even long-time real estate agents shaking their heads in disbelief.
“I’ve never seen anything like it,” said Brint Wahlberg of Windermere Real Estate. “It’s truly an unprecedented market.
"I’ve been in the business 16 years, my mom has been in the industry 36 years. We’ve never seen a market where sellers have such an advantage to drive sales price and terms of sale and everything because there’s such a lack of supply inventory and a lack of affordable new construction.”
Over just the last eight months, the median sale price of homes in the Missoula urban area have surged up 4 percent from $239,500 to the current price of $249,900. That’s a jump of over $10,000 since the end of last year and a $53,000 increase since 2011.
“It’s pretty wild,” said Wahlberg, a past president of the Missoula Organization of Realtors. “Especially for homes priced under $350,000, the options for buyers are smaller than we have ever seen since we started statistical tracking.
"It’s unprecedented as far as the number of listed homes,'' he said. "Buyers are being forced to pay as close to full price as we’ve ever seen. In many cases they’re forced to pay over asking price. There are a lot of buyers and not a lot of houses.”
The picture Wahlberg and other real estate professionals paint of a market that is extremely favorable to sellers will be familiar to anyone who has been trying to buy a starter home in Missoula recently.
“A house comes out that a buyer likes, but they’re competing with four, five, six, seven other buyers right away,” he said. “They can’t come in with a low-ball offer and play the negotiation game. They have to make an offer right out of the gate. That’s one big reason why the median sales price has gained so quickly.”
Wahlberg said that sellers are realizing they can raise their list price.
“It’s based on what they are seeing in the market and what Realtors are coaching them on,” Wahlberg said. “The Realtor is telling them, ‘You are the only listing in this price range, so let’s go $5,000 or $10,000 higher.’ You’ve got buyers sitting on the fence waiting and they’ll go for it.
"The numbers we track show sellers are getting as close to the list price as they ever have before the real estate bubble.”
Wahlberg said that one of the main causes is because there haven’t been any large neighborhoods full of relatively affordable single-family homes – like the Canyon Creek Village or the Pleasant View neighborhood – constructed recently.
“We don’t have those large, affordable, entry-level neighborhoods like we used to,” he said.
The situation has led to a lot of would-be homebuyers getting shut out.
“You’re absolutely seeing frustration,” Wahlberg said. “You miss out on a couple options and then they go to rent. They say ‘forget this’ and try to find a short-term rental. But rental vacancy rates are like 3 percent and they can’t find anything to rent. So in terms of finding housing, it’s been a very frustrating summer in terms of rentals or housing.”
Wahlberg remembers how some people in Missoula expressed surprise a few years ago when so many new apartment complexes were being built.
“Thank goodness we were building those because there would literally be no options,” Wahlberg said. “More availability and more options is what we need across the board. We just need more stuff.”
Carly Kelley of Berkshire Hathaway HomeServices agreed that the lack of inventory is the biggest source of frustration.
“We can find stuff within people’s price range but it’s usually not satisfying,” she said. “There are no options for them in the starter home price range. Anything up to $230,000, there just aren't many options and they tend to fly off the shelves quickly. People are making offers regardless of condition, and as long as it passes appraisal, it’s sold right away.”
Kelley said she had a client last fall who was outbid by other buyers two or three times.
“And there even were some houses we went to see at the end of the day after work on the first day and the house was already under contract,” she recalled. “So it’s like, do you call in sick just to go see a house? That was really frustrating for (her client.) It’s been a challenge. We want to make people happy.”
Kelley said even in the Bonner and Turrah area, potential buyers are getting beat out by offers over the asking price.
She said that there are reasonably priced condos and townhomes available, but people have to be willing to share a wall with neighbors. And getting financing for those types of living units can sometimes be tricky because there are homeowners' boards or associations.
The affordability gap has been growing in Missoula. From From 2012 to 2016, the median price of a home in Missoula rose from $209,700 to $249,900. However, the median income for a single person has stagnated right around $44,000 and actually decreased last year.
As of Aug. 5, there were just 339 active residential listings in the Missoula urban area and 602 in the county. In July alone, the median sale price of the 128 homes sold in the Missoula area was $268,000, so there doesn’t appear to be any deceleration of the climbing prices.
Wahlberg said that it’s a simple math problem: People in Missoula don’t make enough money to afford housing.
“It’s a challenge for people when they see what they are going to be able to afford to buy,” he said.
Even sellers moving within Missoula face problems after they get a good price for their house.
“It’s kind of a catch 22 because they get a good price for their home but then they look around and there’s nothing for them to buy,” he said. “It’s kind of an unfortunate cycle at this point.”
At houses priced $425,000 and above, it’s not a seller’s market. But Wahlberg knows that not a lot of people can get to that range.
The median price of a newly constructed home in Missoula is just a shade under $300,000, and there isn't a large supply of new affordable housing coming on the market to alleviate the pressure anytime soon.
“It’s a very different market than we’ve ever seen,” Wahlberg said.