Montana Housing Market Faces “Frozen” Conditions Amid Affordability Crisis
Montana’s housing market is experiencing what experts describe as a deep freeze, and a single statistic highlights why: roughly 80% of mortgage holders in the state have interest rates 2% to 3% lower than current market rates. For most homeowners, selling their property and buying another doesn’t make financial sense. Even moving to a home of similar value would result in hundreds of extra dollars in monthly payments due to higher interest rates.
This stagnation, paired with record-breaking home prices, has left Montana’s housing market essentially immobile. Over the past decade, the median home price in most Montana cities has more than doubled, making housing unaffordable for many. Current homeowners who try to move often face the harsh reality of paying much more for less.
“Like many of you, I couldn’t afford my own home,” said Missoula Mayor Andrea Davis at a recent forum on housing.
The affordability crisis isn’t just impacting low-income families; it’s now hitting professionals with above-average salaries. Davis shared an example of how the University of Montana law school lost its top candidate for dean because a six-figure salary wasn’t enough to make housing in Missoula financially feasible.
“This is a concern everywhere,” said Benjamin Horowitz of the Minneapolis Federal Reserve Bank, during the same forum. He pointed out that the lack of affordable housing is not only a local issue but part of a nationwide trend with significant economic consequences.
“We’re connecting the housing problem with problems in economic development,” Horowitz explained. When workers can’t afford to move, they miss opportunities to take better jobs, climb the economic ladder, or contribute to the growth of new communities. He also highlighted a link between rising rent levels and homelessness, stating that rent costs are the single most reliable predictor of homelessness. Higher rents invariably lead to more people living without stable housing.
Montana’s housing affordability issues are intensified by a chronic lack of new construction relative to demand. “Montana sees a lack of production relative to demand,” Horowitz said, describing a situation where housing supply has consistently failed to meet the needs of a growing population.
From 2010 to 2020, Montana’s population grew by 9.6%, but housing stock only increased by 6.6%. The COVID-19 pandemic worsened the problem. While other states in the Rocky Mountain region ramped up home construction after 2020, Montana remained an outlier. From 2020 to 2023, it was the only state in the region where housing growth lagged behind demand.
Even Montana’s negative population replacement rate—where deaths outnumber births—is offset by a high rate of in-migration. People from other states continue to move to Montana in large numbers, making the state’s population growth entirely dependent on domestic migration. Currently, Montana ranks fifth nationally in domestic migration, with most new arrivals coming from states like Arizona, Colorado, Utah, and Washington. Contrary to popular belief, California isn’t the top source of newcomers.
While it’s common for Montanans to blame out-of-state buyers for rising housing costs, Horowitz said the data tells a different story. “Most competition for housing comes from other Montanans,” he explained. Years of underbuilding have left the state with limited housing supply, pushing prices higher even for locals.
Unlike neighboring states where population growth is concentrated in a few major cities, Montana’s growth is spread more evenly. While Bozeman and Missoula have gained national attention for their skyrocketing housing costs—at times outpacing cities like Seattle and Portland—the affordability crisis has reached every corner of the state.
“Every metro region in Montana is experiencing its lowest level of affordability on record,” Horowitz said, emphasizing that no area is immune to the housing crunch.
The affordability crisis has disrupted the normal cycle of homeownership. Traditionally, existing homeowners “trade up” to larger or newer homes, freeing up entry-level housing for first-time buyers. But with 66% of Montana homeowners holding mortgage rates of 4% or less, many find it impractical or impossible to move.
“Most Montanans couldn’t afford to move, or if they did, they’d get considerably less house for arguably more money,” Horowitz said.
This standstill has exacerbated Montana’s housing shortage. The state currently faces a deficit of 14,000 housing units, more than triple the shortfall recorded in 2021. At Montana’s current rate of construction, it would take three years just to catch up with today’s demand—and that’s without accounting for future growth.
Horowitz described Montana’s housing situation as a perfect storm of factors: high demand from in-migration, insufficient new construction, and rising mortgage rates. “The trend has still not reversed,” he said.
For Montana, breaking this frozen market will require addressing both housing supply and affordability, or risk seeing the crisis deepen in the years to come.
By: Montana Newsroom staff
