By In a peculiar twist, nearly 80% of homeowners in Montana are stuck in their current homes, unable to sell or upgrade, despite the state being one of the most attractive for newcomers. The primary reason behind this “frozen” housing market is that many homeowners purchased properties before 2020, locking in interest rates that are 2-3% lower than the current average. While this might sound like a positive for homeowners, it’s actually contributing to a crisis in Montana’s housing market.
The problem is simple: Homeowners who purchased their homes when rates were low cannot afford to sell and buy a new one due to significantly higher interest rates now. This phenomenon is preventing the flow of homes onto the market, which has had a domino effect, significantly reducing the available inventory and driving up prices.
The Dilemma: A Housing Market Paralyzed by Low Rates
Montana’s housing market has become a prime example of what happens when homeowners find themselves “stuck” in a low-interest-rate mortgage, unable to make a move due to the steep rise in rates. Even as demand for housing in the state continues to grow, particularly from out-of-state buyers seeking vacation homes or investment properties, homeownership mobility has come to a halt.
As Nick Northern, a local writer, pointed out, the current market dynamics in Montana mean that many long-term residents cannot afford to sell and upgrade to a new home because they would have to finance it at current, much higher interest rates. Essentially, the homeowners are trapped in their existing properties, unable to take advantage of the market’s growth.
The Out-of-State Effect: Inflated Home Prices
The issue is further complicated by out-of-state buyers inflating property values, which were once much more affordable prior to 2020. For example, many of Montana’s home prices have now reached levels higher than those in cities like Portland, Oregon and Seattle, Washington. While Montana’s rural charm, outdoor lifestyle, and scenic beauty make it an attractive place for relocation, the influx of out-of-state buyers, particularly investors and vacation-home seekers, has led to skyrocketing home prices.
This has created a situation where local residents are priced out of the market, further compounding the affordability crisis. With many Montanans unable to afford to buy or move, housing remains out of reach for many who would otherwise look to purchase homes in the state.
The Housing Shortage: Not Just Out-of-State Buyers
While the surge in out-of-state buyers has certainly exacerbated the problem, Montana’s housing crisis is not solely caused by them. Locals are also contributing to the competition for limited housing supply, making it even more difficult to find a property in Montana. According to the Daily Montanan, the state’s population is growing faster than its housing stock, leading to the 14,000 housing unit gap currently facing the state. This gap is more than three times the amount that existed just a few years ago in 2021.
In fact, the shortage of housing has become so dire that it would take nearly three years of constant building at the state’s current rate to meet the existing demand—without factoring in future growth or demand from external sources. This lack of construction capacity, particularly between 2020 and 2023, has made Montana the only state to lag in housing development while other states have experienced a boom in homebuilding since the pandemic.
Montana’s Housing Crisis: A Complicated Issue
The housing shortage is the result of multiple intertwined factors, including:
- Low Inventory: Homeowners, many of whom locked in low interest rates, are not listing their homes, creating a severe shortage in available properties.
- High Demand: A steady influx of out-of-state buyers and growing demand from locals is driving up home prices.
- Slow Construction: Despite increasing demand, construction has not kept pace with population growth, leading to the 14,000-unit deficit.
- Increased Prices: With fewer homes available, prices continue to climb, often exceeding those of larger, more populous states.
Can Montana Overcome This Housing Crisis?
There’s no simple answer to Montana’s housing dilemma. With such a significant gap between demand and supply, the state faces a monumental challenge in addressing the crisis. While local builders are trying to ramp up construction, the scale of the issue requires action on a larger level. According to the Daily Montanan, the state must drastically increase its housing construction rate to even come close to meeting current demand.
However, the state’s political leadership has yet to present a comprehensive strategy to tackle this issue, and solutions to date have been fragmented. In fact, the housing shortage remains one of the major issues yet to be fully addressed by Montana’s policymakers, despite growing public concern and the recent election cycle.
What Needs to Be Done?
To address the housing crisis, Montana must:
- Increase Housing Supply: The state needs to encourage more construction to keep pace with demand. This may involve streamlining regulations or incentivising developers to build more affordable homes.
- Support First-Time Homebuyers: Programs aimed at supporting locals looking to buy their first homes could help make homeownership more accessible.
- Address Affordability: Policymakers may need to find ways to make homes more affordable for residents while still accommodating out-of-state buyers and investors.
A Rocky Road Ahead
Montana’s housing market is at a crossroads. The combination of a stagnant inventory, soaring prices, and a substantial housing gap has created a crisis that is not easily solved. While the state remains a desirable place to live for many, both locals and out-of-staters alike, the challenges facing its housing market are growing more urgent. Without significant changes in construction, policies, and affordability strategies, Montana’s housing crisis will continue to deepen.