The Montana Real Estate Market: Everything You Need to Know

Montana is a beautiful destination for homebuyers who don't like big cities, offering small-town charm with an abiding sense of familiarity.

Often called "Big Sky Country," Montana has plenty of wide-open spaces juxtaposed against majestic mountains and skies stretching uninterrupted to the horizon.

Additionally, this state offers a thriving real estate market, a bustling economy, many job opportunities, and a low cost of living.

However, there are other factors to consider before buying homes in Montana. What do experts say about the future of this state's housing market? Is it likely to crash soon? Should investors purchase residential properties there?

Whether you're a first-time buyer or an experienced real estate investor, understanding the Montana housing market trends and predictions is crucial to know if you should buy a home in this state.

Luckily, here's all the information you need to make a wise decision. Read on!

Montana Real Estate Market Trends

In 2023, the Montana housing market is still strong, with robust demand and increasing property sales despite high prices.

While each city and town has different real estate trends, experts believe that no metro area in Montana will experience a decline in home values ​​this year.

However, like other states, Montana has been struggling due to the effects of the Covid-19 pandemic on the local economy.

Here's more information about the Montana housing market trends spotted during this year's first quarter.

Home Prices

In Montana, home prices rose by 0.2% year over year, reaching an average sale price of $747,158 in March of this year. Compared to reports for the fourth quarter of 2022, that's an increase of 3.1%.

Despite high financing costs, the Montana real estate market has shown signs of resilience. The median listing price rose by 1.4% compared to reports issued in late 2022.

Year over year, home prices increased in five counties: Lake, Missoula, Park, Flathead, and Lewis & Clark. In Madison, they remained static.

While median listing prices were higher across the region, they fell in Broadwater, Gallatin, Jefferson, and Ravalli counties.

Supply and Demand

The latest reports showed that the number of home sales fell by 29.6% to 1,273 units sold in this year's first quarter compared to January-March 2022 figures.

Sales activity also fell by 23.4% during this year's first quarter compared to the previous quarter.

Although the listing activity between January and March was 66% higher than in the same period last year, it fell by 3.5% compared to the fourth quarter of 2022.

Since last year's first quarter, sales have fallen across the board. Compared to reports issued between October and December, sales were up in Jefferson County. However, the number dropped in the rest of the market areas.

Analysts expect closings to rise in this year's second quarter, as pending sales increased by 14.1% quarter over quarter. However, low inventory could hold the Montana housing market back.

Median Days on the Market

Compared to the same period in 2022, the amount of time it took to sell a home in Montana rose by 19 days.

A study conducted by Windermere Real Estate showed that the median days on the market for a home in Montana was 93 days, considering data from the following markets:

• Missoula (57)
• Ravalli (69)
• Gallatin (74)
• Broadwater (81)
• Lewis & Clark (83)
• Park (97)
• Jefferson (103)
• Lake (113)
• Madison (123)
• Flathead (133)

However, in Broadwater and Madison counties, the average time it took to sell a home fell by 17 days and 13 days, respectively.

Mortgage Rates

Although early March's banking crisis impacted the market, during this year's first quarter, mortgage rates were less volatile than in 2022. These are the latest figures:

• Last year's first quarter: 3.82%
• Last year's second quarter: 5.27%
• Last year's third quarter: 5.62%
• Last year's fourth quarter: 6.79%
• This year's first quarter: 6.37%

Foreclosures

According to SoFi's March report, Montana ranked 47th for the highest foreclosure rate. In this state, which has the country's 44th largest population, there were 34 foreclosures out of 512,553 homes.

As a result, the foreclosure rate in Montana was one in every 15,075 housing units. Roosevelt, Powell, Wibaux, Deer Lodge, and Teton had the most foreclosures per housing unit.

What Factors Affect the Montana Real Estate Market?

Different aspects can affect the Montana real estate market, including the state's economy, the national mortgage interest rates, local government policies, and demographics.

The Economy in Montana

The value of real estate properties often fluctuates due to changes in the regional economy, which is measured by multiple indicators, such as employment rate, Gross Domestic Product (GDP), goods' prices, and manufacturing activity.

Overall, the real estate market is sluggish if the economy struggles. Therefore, homebuyers and investors should consider properties' sensitivity to the economic cycle before purchasing a housing unit.

The latest reports showed that Montana added about 12,600 jobs year over year, which accounts for a growth rate of 2.5%.

Additionally, March figures suggest that the slowdown in employment gains reported in last year's fourth quarter has turned.

Most counties and towns followed the same trajectory. However, Billings lost around 400 jobs compared to last year's reports.

In February of this year, the state unemployment rate was 2.4%, down from 2.5% in last year's first quarter. Billings had the lowest jobless rate (2.2%). In addition, about 2.4% of the labor force in Great Falls and Missoula remained unemployed.

Mortgage Interest Rates

Changes in interest rates can determine a person's ability to buy a home. If they're low, the cost to get a mortgage goes down. As a result, there's a higher demand for real estate properties, and prices rise.

However, the costs to get a loan rise when interest rates rise are higher, which lowers demand and leads to a significant drop in home prices.

Mortgage interest rates have more than doubled since the Fed announced the first rate hike in March of last year. However, they have been far less volatile in 2023.

Government Policies and/or Subsidies

Government policies also have a sizable impact on the Montana housing market. Authorities can increase demand for real estate properties through tax credits and subsidies, for example.

Investors and homebuyers should consider these factors to identify potentially false trends.

Demographics

Changes in demographics, which describe the population's age, income, gender, race, growth, and migration patterns, also influence housing markets.

Overall, these factors determine how homes are priced and allow investors to identify the types of real estate properties that are in demand.

The retirement of baby boomers, who were born between 1945 and 1964, began a decade ago. This generational trend may affect prices and the current demand for second homes in popular vacation areas, for example.

Will the Montana Real Estate Market Crash Soon?

Many homebuyers and investors are unsure whether to invest in real estate due to growing rumors about a housing market crash.

However, the latest figures show that the real estate market has started to cool off. These are a few signs that it's unlikely to crash soon:

High Housing Demand

Although high listing prices make homes spend more time on the market before going under contract and limit the number of potential buyers, demand for real estate properties in Montana is still high.

Recently, the Montana housing market has seen a significant surge as more people move to this state.

Low Housing Supply

Compared to last year's figures, Montana's housing inventory has fallen. The limited number of homes for sale often leads to bidding wars, driving prices up.

Fewer Newly Constructed Homes

Since fewer people are interested in buying land, getting regulatory approval, and building properties, the supply will likely remain low.

Tighter Lending Criteria

Today's lenders have set stricter standards. Borrowers must meet specific credit score requirements and make down payments to get loans.

Since setting tighter lending criteria determines the number of qualified home buyers, it affects demand.

Fewer Foreclosures

Property data provider ATTOM reported that the number of housing units with foreclosure filings increased in March. However, Montana is one of the five states with the lowest foreclosure rates.

Montana Real Estate Market Statistics

If you want to know more about Montana's real estate market before purchasing a new home, consider these statistics:

• The total employment in Montana rose by 6.26% to 32,760 workers from January 2021 to January 2023.
• Montana had a foreclosure rate of one in every 15,075 homes as of March 2023.
• The number of homes sold in Montana fell by 29.3% from March 2022 to March 2023.
• Broadwater and Park counties had the highest annual change in home sales at -60.9% and -60.2%, respectively.
• The average sale price of a home in Montana in March was 3.1% higher than in December of last year.
• The average market time rose across the state. Broadwater and Madison were the only counties that saw days on the market fall.

Housing Market Predictions

Do you want to know if investing in the Montana real estate market is a good idea? Here are a few predictions based on the latest trends:

• Experts say mortgage rates will likely increase to 8.50% (30-year fixed-rate loans) or 7.70% (15-year fixed-rate loans) after the Fed raises its funds rate by 175-200 basis points.
• Increasing mortgage rates will have a major impact on this year's home sales, causing a drop as high as 10% in 2024.
• Analysts believe the median days on the market before a home goes under contract will rise by 10 days or more.
• Home prices are expected to fall by 5-10% in 2023.
• The housing supply will remain low if mortgage interest rates rise.
• If the mortgage payment remains high and houses are less affordable, home affordability will be low.

Montana Housing Market Predictions

Do you plan to buy a real estate property in Montana? Check out these predictions:

• Windermere Real Estate expects mortgage rates to gradually decline to 6.26% in this year's second quarter, 5.78% in the third quarter, 5.43% in the fourth quarter, and 5.28% in the first quarter of 2024.
• Home prices in Billings and Bozeman are forecast to rise by 1.3% and 2.4%, respectively, between February 2023 and February 2024.
• Zillow predicts that the housing market will continue to rise this year.

The Bottom Line

Montana is an attractive destination for prospective buyers looking for the perfect home. Although many people are concerned about last year's trends, such as the drop in annual job gains, or the expected home price growth, this state has a strong real estate market.

In addition, experts have seen other positive trends. Montana's job market is stable, with a low unemployment rate, and almost all local markets are still competitive. 

Many analysts also expect mortgage rates to fall, which would also have a positive impact on the Montana real estate market.

Frequently Asked Questions

Is Montana a Seller's Market?

Yes, it is! While there are still plenty of opportunities for homebuyers, the housing inventory in Montana remains low, favoring sellers.

Is It a Good Idea to Buy a Home in Montana?

Montana's real estate market is still strong and attractive to homebuyers. However, investors must consider local data and other factors to make a sound decision.

If you're still not sure whether investing in the Montana housing market is a good idea, contact experienced real estate agents.

Are Montana Home Sales Expected to Go Up?

The housing demand in the Montana market is still high. Therefore, many analysts expect sales to rise this year.