Montana Real Estate Market Trends & Analysis

The Montana real estate market has been propped up by a thriving economy.  Otherwise known as Big Sky Country, the entire state of Montana is currently in the midst of a historic economic expansion.  The further the state distances itself from the latest recession, the more it continues to foster wage growth, a strong entrepreneurial climate, and a wealth of new and exciting job opportunities. 

It is worth noting, however, that economic expansion is perhaps most noticeable in the housing market. Due, in large part, to increasing wages, low interest rates, and relatively affordable homes, more and more people are looking to actively participate in the local real estate market.  Current market conditions are about as balanced as anywhere else in the country, which bodes well for buyers, sellers and investors.

The Top Montana Real Estate Markets

While the best real estate market in Montana is up for debate, here’s a list of the cities investors may want to pay special considerations to:

• Billings

• Bozeman

• Great Falls

• Helena

• Missoula

Montana Real Estate Fees & Regulations

Real Estate

Closing Conducted by:	Escrow
Conveyance:	Warranty Deed

Foreclosure Procedure

Primary Foreclosure Method:	Non-Judicial
Process Period:	4 - 6 months
Notice of Sale:	Trustee
Redemption Period:	12 Months

Taxes

Income Tax:	1% - 6.9%
Corporate Tax:	6.75%
Sales Tax:	None
Estate Tax:	No
Inheritance Tax:	No
Median Property Tax:	0.83%
Property Taxes by County:	http://www.tax-rates.org/montana/property-tax#Counties

Average Transactional Costs

Closing Cost:	$2,491.00
Transfer Fee:	No Fees
Origination Fee:	$1,796.00

Overview

• Median Home Value: $279,288

• 1-Year Appreciation Rate: +5.3%

• Median Home Value (1-Year Forecast): +3.7%

• Median Rent Price: $1,295

• Price-To-Rent Ratio: 17.97

• Average Days On Market: 91

• Unemployment Rate: 3.4% (latest estimate by the Bureau Of Labor Statistics)

• Population: 1,062,305 (latest estimate by the U.S. Census Bureau)

• Median Household Income: $52,559 (latest estimate by the U.S. Census Bureau)

• Percentage Of Vacant Homes: 14.92%

• Foreclosure Rate: 1 in every 9,637 (1.0%)

Median Home Prices In Montana

The median home value in Montana is a healthy $279,288. Over the last eight years, real estate in Montana has appreciated (on average) somewhere in the neighborhood of 43.9%. As recently as January 2012, in fact, home prices bottomed out around $194,000. In that time, several fundamental indicators combined to create the perfect storm. Prices increased for eight consecutive years in the wake of an improving economy, growing optimism in the local market, and (for better or for worse) a distinct lack of available inventory.

The median home price in the United States, on the other hand, followed a similar ascension—albeit at a slightly faster pace. Not unlike Montana, the national market was at one of its lowest points of the recession in the first part of 2012. In January of that year, the median home value in the United States was about $160,000. However, for many of the same reasons Montana saw increases, home values across the United States jumped 52.5% in a matter of eight years. Today, the median home value across the country is $244,054.

While the median home value in the United States has outpaced Montana for the better part of a decade, the last 12 months tell a different story. In one year’s time (December 2018 to January 2020), the median home value in Montana increased 5.3%. The median home value across the country, on the other hand, managed a slightly more modest 3.7% jump over the same period of time.

Moving forward, indicators suggest appreciation rates in Montana will continue to outpace the national average. Whereas Zillow has forecasted a 3.7% increase for the entire state of Montana, the median home value in the United States should see a slightly more modest 2.8% jump. Thanks, in large part, to a lack of available housing, it’s safe to assume home values will increase year over year.

Median Rent Prices In Montana

More often than not, rental rates tend to mimic their home price counterparts. Do, in large part, to several unique correlations, increasing home prices tend to rise rental rates. Consequently, rental rates will usually fall when home prices depreciate. While there are certainly exceptions to the rule, changes in home prices will typically serve as the primary reason rental rates climb and sink. Think about it: Rising home prices may prevent many buyers from participating in the market, relegating them to tenants instead of homeowners. The more people that are priced out of buying, the more competition there will be for rental housing.

Real estate in Montana does not appear to be any exception to this rule. As home prices have increased for the better part of a decade, so too have rental rates—albeit at a tempered pace. Whereas real estate in Montana appreciated by an average of 43.9% over the course of eight years, rental prices jumped about 19.9% in the same time. Following eight years of increases, the average rental listing price in Montana is now somewhere in the neighborhood of $1,295. To put things into perspective, the median rent price in the United States is $1,650; that is, of course, after appreciating 25.9% since January 2012.

Significant increases to both rental listing prices and median home values have brought Montana’s price-to-rent ratio to 17.97. At that point, it is usually better to rent than to buy a house in Montana, which is great news for local real estate investors who specialize in building rental property portfolios.

Montana Foreclosure Trends & Statistics

Compared to the rest of the country, Montana has a low foreclosure rate. With a mere one in every 9,637 homes in some stage of distress (pre-foreclosure, auction or bank-owned), Montana’s foreclosure rate sits around a healthy 1.0%. The current foreclosure rate across the entire country, on the other hand, has reached 3.9%.

While approximately one-quarter of the national average, Montana’s foreclosure rate has actually increased in recent history. As recently as December, “the number of properties that received a foreclosure filing in MT was 49% higher than the previous month and 16% higher than the same time last year,” according to RealtyTrac.

In the wake of recent increases to the state’s foreclosure rate, some cities have found themselves with higher distributions of distressed homes than others. Five counties, in particular, now have higher distributions of distressed homes than anywhere else across the state:

• Toole (1 in every 2,373)

• Valley (1 in every 2,435)

• Powell (1 in every 3,169)

• Cascade (1 in every 3,193)

• Sanders (1 in every 3,377)

Tax Lien Investing

• Tax Lien or Deed: Tax Lien State

• Interest Rate:10%

• Redemption Period:2-3 Years (depending on property type)

Real Estate Investing In Montana

Not unlike every other market across the country, real estate investors in Montana have made a living off of investing in distressed assets. If for nothing else, distressed homes have become synonymous with attractive profit margins, low acquisition costs and seller motivation—three of the most coveted indicators of a real estate deal. That said, there’s one type of distressed property investors in Montana should pay special considerations to: bank-owned homes.

Making up 53.8% of the state’s distressed inventory, bank-owned homes are the most abundant source of foreclosed properties. As their names suggest, bank-owned homes are currently in the possession of the loan originator (or the subsequent bank responsible for the loan). That means a homeowner defaulted on their mortgage and the asset was repossessed by the lending institution.

It is worth noting, however, that banks aren’t in the business of holding onto non-performing loans, nor are they interested in incurring holding costs as a result. Therefore, it’s safe to assume many bank-owned homes may be purchased directly from the bank. In fact, many banks have departments dedicated to selling the repossessed assets sitting on their books; most investors already know this, and it’s about time you did, too. Provided you are able to convince the bank that selling is in their best interest, it’s entirely possible to walk away with a deal, and perhaps even one with attractive profit margins.

Outside of bank-owned homes, the remaining distressed inventory in Montana is either up for auction, or will be at some point in the near future. Auctions represent one of the banks’ last-ditch efforts to recoup losses incurred from a foreclosure. Consequently, banks will auction of the properties they have repossessed to make up for the mortgage payments they are no longer receiving. What’s more, their desperation will work in favor of investors across Montana. At the very least, local investors will be able to submit bids that are below market value in an attempt to secure a deal, which can only help improve profit margins.

Real estate investors in Montana should place an emphasis on seeking out auctions and bank-owned homes if they are interested in dealing with foreclosures. However, locating and securing deals is only part of the equation. Montana real estate investors need to not only know where to find good deals, but they also need to know which exit strategies to execute, which begs the question: What should real estate investors in Montana do with the homes once they are acquired? Should they rehab and flip them? Should they look into wholesaling? Should they build a long-term, passive income portfolio?

Montana’s relatively high price-to-rent ratio has eaten into the profit margins of rental property portfolios. While it’s entirely possible to invest in rental properties in Montana, local investors may have better luck rehabbing and wholesaling.

Montana Housing Market Predictions

The Montana real estate market has followed the same trajectory as the rest of the country. For the better part of a decade, in fact, real estate in Montana has exhibited many of the same characteristics as its national counterpart. Price increases, confidence in the market and several other indicators are in line with national trends, but what does that mean moving forward? What can Montana real estate investors, homeowners and prospective buyers expect for the foreseeable future? Here are some of the Montana real estate predictions most likely to come to fruition over the course of next year:

• Appreciation rates will continue to temper: Real estate in Montana has appreciated, on average, by as much as 5.3% in the last year. In the eight years leading up to today, the median home price across the state of Montana jumped 43.9%. That said, the same indicators responsible for increasing prices aren’t expected to have the same impact in the coming year. Thanks, in large part, to growing inventory levels and historically high prices, median home values should continue to increase, but at a slower rate than residents have grown accustomed to. Instead of the numbers seen in the last year, expect homes to appreciate approximately 3.7%.

• Great Falls will see an influx of buyers: More buyers will look to escape the high prices of cities like Billings and Bozeman by shifting their attention towards secondary cities. With a median home value well below the national average, Great Falls should see more people move within its city limits. Expect the population of Great Falls to increase, along with home values and competition over available housing.

• Optimism will grow throughout the year: Sales are expected to temper in the face of increasing prices and inventory remains tight. However, the Montana housing market remains supported by an incredibly strong economy; that, in addition to historically low interest rates, should serve as the catalyst for a lot of activity and optimism.

Montana Real Estate Market Summary

The Montana real estate market has found itself positioned comfortably at the forefront of a steady national recovery. Due, in large part, to persistent economic growth, real estate in Montana has prospered and thrived. Home prices have increased for the better part of a decade, more people are in a better position to participate in the market, and—perhaps even more importantly—confidence has grown. All of these factors, and many more just like them, have served as a catalyst for the Montana real estate market. Buyers, sellers and investors should all take solace in the fact that real estate in Montana is on solid ground.

Sources:

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https://www.census.gov/quickfacts/fact/table/MT/PST045218
https://www.bls.gov/regions/mountain-plains/montana.htm#eag
https://www.realtytrac.com/statsandtrends/foreclosuretrends/mt/
https://www.realtytrac.com/statsandtrends/mt/
https://www.realtytrac.com/statsandtrends/foreclosuretrends/
https://www.zillow.com/mt/home-values/
https://www.zillow.com/home-values/
https://www.zillow.com/great-falls-mt/home-values/
https://www.attomdata.com/news/market-trends/home-sales-prices/attom-data-solutions-year-end-2019-u-s-home-sales-report/
https://missoulacurrent.com/business/2019/09/montana-economic-growth/