Montana’s housing market has undergone dramatic shifts in recent years, especially for budget-conscious households (those earning under $250,000 annually). From 2018 through 2023, home prices surged to record highs, straining affordability for local buyers. Find out how Montana households in this income range navigated the market, including owner-occupied home purchases, second homes, and investment properties.
Montana’s Housing Market Overview (2018–2023)
Montana experienced an unprecedented housing boom in 2018–2023, with home prices far outpacing income growth. The state’s median home sale price nearly doubled in five years – rising about 89.6% from roughly $266,500 in 2018 to $505,400 in 2023. By contrast, median household income in Montana increased only ~27.9% in that span (from about $55,300 to $70,800). This mismatch between soaring prices and modest income gains led to a steep decline in affordability. By 2023 Montana had become one of the least affordable states for homebuyers relative to local incomes, even surpassing California in that regard.
Housing inventory was extremely tight through these years, intensifying competition. A combination of factors – strong demand, low supply, and a pandemic-era migration surge – fueled the price growth. In 2020–2021, record-low mortgage rates (30-year rates under 3%) and the rise of remote work drove many buyers into the market, including out-of-state newcomers.
Market Activity and Price Trends
At the same time, new construction lagged behind demand (a hangover from the slow building of the 2010s), leaving few homes for sale. According to Zillow data, Montana’s typical home value jumped 50% just from early 2020 to mid-2022 (from around $296K to $446K). By mid-2022, Montana home values were the 5th fastest-growing in the nation since the pandemic began.
Home sales volume initially surged during the pandemic boom then cooled as affordability waned. In Missoula (Montana’s second-largest city), 2020 and 2021 saw a frenetic market, but by 2023 annual sales dropped to 952 homes, a ~13% decline from the prior year and the third consecutive annual drop in sales. This was near the post-2008 recession lows as buyers grew scarce at high prices.
Record Prices Amid Fewer Transactions
Despite the slowdown in number of transactions, home prices plateaued at record highs by 2023 rather than dropping. Missoula notched a record median price of $550,000 in 2023 (up 5.8% from 2022), and Bozeman – the priciest major market – hit a staggering median of about $979,500 for single-family homes by January 2024. Even traditionally affordable Billings saw its median price climb ~51% from 2018 ($248K) to 2023 ($375K).
The affordability gap for local wage earners became a crisis: as of 2023, a typical Montana home at $505K cost roughly 7 times the state’s median household income, whereas five years prior it was about 4.8 times income. Unsurprisingly, housing cost burdens worsened – by one 2024 analysis, four of the top five occupations in Billings (around 29,000 workers) did not earn enough to afford a median-priced home there.
Who Is Buying: Local vs. Out-of-State and First-Time vs. Repeat Buyers
A popular narrative during 2020–2022 was that an influx of out-of-state buyers with deep pockets (often from higher-income areas) was gobbling up Montana real estate, edging out local residents. Indeed, Montana attracted many new migrants – the state led the nation in net inbound moves in 2021 – and remote workers from coastal cities flocked to places like Bozeman, Missoula, and the Flathead Lake area.
The Local Buyer Majority
However, data suggests that Montana buyers remained predominantly local. For example, in Missoula only about 18.7% of one large lender’s 2020 home purchase loans went to out-of-state buyers (up from ~13% in 2019). Realtors noted a slight uptick in non-local buyers during the pandemic (many being former Montanans returning home), but not a complete takeover. In other words, Montana households still accounted for the majority of home purchases, though they now had to compete with a greater number of non-local and cash buyers than before.
Declining First-Time Homebuyers
One clear change in the buyer mix was a drop in the share of first-time homebuyers. High prices and tough competition raised barriers to entry for younger buyers without existing home equity. Nationally, the first-time buyer share fell to just 26% in 2022, the lowest since tracking began in 1981. In Bozeman, it was reported that only 24% of recent buyers were first-timers, down from 32% a year earlier.
Many Montanans in their 20s and early 30s have been forced to delay buying; the median age of first-time buyers jumped to 38 in 2023 (after hovering in the early 30s for years). Repeat or move-up buyers (often older, higher-income, or equity-rich) thus dominated the market from 2018–2023.
Changing Buyer Demographics
About 62% of recent buyers were married couples (often dual-income), while single buyers – especially single women (20% of buyers) – have grown in presence despite the challenges. Notably, 73% of buyers in 2023 had no children under 18 at home, the highest rate on record – this indicates more empty-nesters, retirees, and young professionals without kids are the ones able to buy, whereas families with young children (who tend to be younger first-time buyers) are purchasing less frequently than before.
What They’re Buying: Property Types and Size of Homes
Across Montana, detached single-family homes remain by far the most common property purchased, especially for owner-occupants. Even nationally, 75% of recent homebuyers bought a detached single-family house. In Montana’s smaller cities and rural areas, that figure is likely even higher – historically, the state has had one of the highest rates of households living in single-family homes (as opposed to multi-unit buildings).
Townhouses and condominiums make up a much smaller slice of purchases (often under 10% combined). In 2023, the median sale price of a Montana single-family home was around $490,000, compared to about $435,000 for townhomes/condos. The gap reflects both the property type differences and the fact that condos tend to be concentrated in the higher-cost city markets.
Growing Interest in Alternative Housing Types
That said, there has been increasing interest in condos and townhomes in certain Montana markets as an affordability fallback. Bozeman, for example, saw a dramatic increase in multifamily units (condos, townhomes, apartments) under construction in recent years. This was partly driven by developers and city planners trying to add more attainable housing.
For buyers, a condo or townhome can offer a lower price entry point than a standalone house – although in Bozeman’s hot market, even these attached homes have become quite expensive. By late 2023, a condo in Bozeman or Whitefish could easily cost well over $400K.
Upsizing vs. Downsizing Trends
In terms of home size and “upsizing” vs. “downsizing”, Montana’s trends have been mixed. During 2018–2021, many families upsized – taking advantage of low interest rates to move from starter homes into larger homes with more space (especially as remote work and stay-at-home lifestyles made space a premium).
On the other end, some empty-nesters and retirees looked to downsize to smaller, easier-to-maintain homes. However, downsizing in Montana’s hot market became challenging – smaller homes and condos were in short supply and often not much cheaper. In fact, some older homeowners opted to stay put because selling and buying again in the same market would not yield savings.
Creative Housing Solutions
Interestingly, a segment of Montana’s retirees and high-income professionals have bucked the downsizing trend and even upsized or bought second properties. Some well-off buyers sought homes with more acreage or mountain views for their golden years, while others kept their primary residence but purchased a vacation home elsewhere in Montana.
For most budget-conscious households, though, the priority was simply securing any affordable primary home amid the frenzy, rather than making discretionary changes in home size. This led some younger buyers to get creative – for example, purchasing a multi-generational home with parents or opting for a duplex (living in one unit and renting the other) to offset costs. In 2022–2023, about 17% of homebuyers nationally chose multi-generational homes, often citing cost savings as the motive.
The Surge in Second Homes and Investment Properties
Montana’s scenic appeal and rural charm have long drawn second-home buyers, but the pandemic years saw an unprecedented surge in vacation-home purchases. Nationwide, vacation home sales skyrocketed 57% year-over-year in early 2021, vastly outpacing the growth in primary home sales.
“Zoom Towns” and Vacation Destinations
In Montana, many so-called “Zoom towns” – attractive vacation destinations that boomed as people could work remotely – experienced this influx. For example, Flathead County (northwest Montana), home to Flathead Lake and Whitefish Mountain Resort, saw home values jump 35% in just one year (May 2021 to May 2022). The resort town of Whitefish itself saw median prices soar to over $1.3 million by mid-2022.
These gains were fueled by wealthy out-of-state buyers snapping up lakefront cabins, ski condos, and luxury retreats. Similarly, Bozeman and the Paradise Valley area attracted many second-home seekers (some as investment rentals, others purely for family use). By mid-2022 Bozeman’s home values were up nearly 20% year-over-year.
Investment Property Activity
Investment property activity also climbed during 2018–2021. With low interest rates and surging rents, real estate investors – both local and out-of-state – targeted Montana’s housing. Some buyers purchased homes not to live in, but to rent out (long-term rentals in cities or short-term vacation rentals in tourist areas).
Short-term rentals (like Airbnb cabins) became especially popular income generators in destinations like Flathead, Gallatin, and Madison counties. This drew criticism from locals who felt investors were driving up prices and reducing the stock of homes for resident families.
Market Cooling and Changing Trends
By 2023, as interest rates rose, the frenzy for second homes cooled somewhat. The share of vacation home sales nationally dipped from its 2021 peak (6.7% of all existing sales) back toward historical norms. Montana’s resort markets likewise saw sales volumes fall in 2022–2023, as some discretionary buyers paused.
Notably, in Missoula – which has both primary and second-home buyers – cash purchases reached a record 32.5% of all sales in 2023, indicating investors and equity-rich buyers were still very active even as overall transactions slowed.
The state’s luxury segment (homes $750K and above) had an oversupply by 2023, suggesting the high-end second-home market softened relative to the intense demand for mid-priced “workforce housing” which remained in critically short supply.
Financing and Assistance Trends for Moderate-Income Buyers
For Montana households earning under $250K – which includes most of the state’s teachers, nurses, craftspeople, service workers, and even many dual-income professionals – financing choices and assistance programs have been key to attaining homeownership. Over 2018–2023, there were notable shifts in how homes were purchased:
Mortgage Rate Fluctuations
Mortgage rates: Homebuying in this period was bookended by historically low and high interest rates. Many Montanans rushed to buy or refinance in 2020–2021 when 30-year mortgage rates dropped below 3%, the lowest in 50 years. These low rates reduced monthly payments and allowed buyers to stretch their budgets to afford higher-priced homes.
However, by 2022–2023, the Federal Reserve’s inflation fight drove rates above 7%, dramatically increasing borrowing costs. This rate shock reduced what buyers could qualify for – e.g. a $400,000 loan at 3% has a similar payment to roughly a $250,000 loan at 7% – pricing many out.
It also froze existing homeowners in place; roughly 66% of Montana homeowners with mortgages have rates under 4%, making them reluctant to sell and lose that low rate (“rate lock-in”). Thus, fewer entry-level homes came on the market, compounding challenges for first-time buyers.
Loan Types and Programs
Loan types: Conventional mortgages (often requiring 5–20% down) remained the most common financing for Montana homebuyers in this period, especially as sellers favored buyers with conventional pre-approvals during bidding wars.
However, many moderate-income and first-time buyers turned to government-backed loans like FHA and USDA. FHA loans, which allow as low as 3.5% down and more flexible credit, have historically been a popular tool for first-timers. Nationally, FHA’s share of the mortgage market briefly declined during the ultra-competitive 2021 market (when cash and large down payments were king), but FHA still insured loans for over 498,000 first-time homebuyers in FY2023 (comprising 82% of FHA’s purchase loans).
In Montana, FHA and VA loans are commonly used in cities, while the USDA Rural Development loan is a crucial option in smaller towns and rural counties – it offers 0% down payment financing for eligible rural buyers. A vast portion of Montana (outside the metros) qualifies as “rural” under USDA, making this program a cornerstone for lower-income buyers.
Down Payment Challenges and Assistance
Down payments: With home prices escalating, down payments in dollar terms grew larger, which was a hurdle for moderate earners. The traditional 20% down on a median Montana home went from about $50K in 2018 to over $100K by 2023. Few first-time buyers can save that quickly, so many relied on smaller down payments or assistance.
According to NAR surveys, the typical first-time buyer put down just 6% in recent years, vs. 17% for repeat buyers. Montana buyers mirrored this, often scraping together just enough – via savings, family gifts, or secondary loans – to meet minimum requirements.
State programs stepped in to help: the Montana Board of Housing offers down payment assistance loans up to $15,000 (5% of purchase price) for qualifying buyers. These can be paired with an MBOH low-interest 30-year fixed loan. There are income and price limits (e.g. as of 2023, around $80,000 household income for a deferred down-payment loan) which target this aid to lower-income households.
Cash Buyers and Market Competition
Cash vs. financing: One striking trend was the rise of cash buyers in Montana’s market. Many out-of-state purchasers paid cash for second homes, and some local retirees downsizing also had substantial equity to pay cash. By late 2023, about one-third of home sales in Missoula were cash, nearly matching the national high (around 34%).
This is a double-edged sword for moderate-income buyers: while low interest rates initially enabled them to compete with small down payments, the later prevalence of cash and investors meant financed buyers often lost out in multiple-offer situations.
Realtors in competitive Montana markets frequently saw offers from FHA or VA borrowers get passed over in favor of cash or large-conventional offers. By 2023, with high rates, cash became even more advantageous – an agent in Bozeman noted 26% of their recent buyers were cash (up from 20% the year prior).
In summary, Montana’s budget-conscious buyers increasingly leveraged every available resource to buy homes from 2018–2023. They locked in ultra-low interest rates when possible, embraced low-down-payment loans and assistance programs, and many made trade-offs (smaller homes, different locations, or teaming up with family) to make ownership feasible.
Comparing 2018–2023 with 2008–2017
To put recent trends in context, it’s illuminating to compare them with the previous decade (2008–2017), a period that covered the housing bust, a gradual recovery, and the pre-pandemic market. Several key differences emerge:
Price Trajectories and Affordability
Home Price Trajectory: The 2008–2017 period began with a housing crash, whereas 2018–2023 saw a boom. Montana actually weathered the 2008 financial crisis relatively well compared to some states – home prices dipped but did not plummet as severely as in California or Nevada.
By 2017, values had rebounded strongly. In fact, Montana led all states with a 71% increase in median property values from 2005 to 2017, reflecting steady post-recession growth. However, that 71% gain was spread over 12 years. In contrast, 2018–2023’s 89% jump in prices happened in just 5 years, indicating a much more rapid escalation recently.
Affordability in 2008–2017 was therefore better overall – even at their 2017 peak, Montana’s home prices (median ~$270K by some estimates) coupled with lower interest rates meant more households could afford to buy. By the end of 2023, with median prices around $500K, affordability had worsened dramatically.
Changing Buyer Demographics
Buyer Demographics: The earlier decade saw a healthier influx of first-time buyers as the market recovered. Coming out of the Great Recession, interest rates were low and programs like the first-time homebuyer tax credit (2008–2010) spurred young buyers.
Through the mid-2010s, first-timers typically made up 35% to 40% of home sales nationally (and Montana likely followed suit). The median first-time buyer age in 2015 was about 31.
Additionally, move-up buyers in 2008–2017 often had modest price differentials – someone selling a home for $200K in 2012 might buy their next one at $250K. By 2018–2023, that same step up could cost hundreds of thousands more, limiting move-up activity to those with substantial means.
Household incomes did rise in the 2010s (Montana’s median household income grew roughly 25% from 2008 to 2017), but not nearly as fast as the 2020s home prices. The net result: the pool of Montanans able to buy homes with ease shrank in the latter period.
Property Types and Location Preferences
Property Types and Locations: In 2008–2017, single-family homes were even more dominant in sales, simply because Montana had very few condos or townhomes then. Condo development in places like Bozeman and Missoula was minimal until the late 2010s. Thus, virtually all homebuying pre-2018 was houses, often on decent-sized lots.
In terms of location trends, the 2008–2017 decade saw people moving into metro areas like Bozeman, Missoula, and Billings as those economies grew, but there was also plenty of affordable opportunity in smaller towns.
Post-2018, Bozeman and other desirable cities super-charged in price, and we saw a relative shift: some buyers chose outlying areas or entirely different Montana regions for affordability. For example, a family priced out of Bozeman by 2021 might relocate to more affordable Great Falls or Butte.
Generational Housing Patterns
Upsizing/Downsizing: During 2008–2017, downsizing by Baby Boomers was a more visible trend. After the recession, many older homeowners sold large houses (which younger families were happy to buy) and moved into smaller homes or moved out of state. There was a generational turnover that helped supply in that era.
By 2018–2023, that dynamic stalled – boomers as a group became less likely to move, either for financial reasons or because few alternatives were cheaper. In fact, a 2023 national study found nearly 39% of home sellers over age 55 had owned their previous home for 20+ years, indicating many stayed put long-term.
On the flip side, millennial buyers in the 2010s often could purchase their first starter home by their late 20s, then look to upgrade in their 30s. But millennials in Montana in the 2020s have struggled to even get that starter, much less upgrade.
Financing Evolution
Financing Behavior: In the late 2000s and early 2010s, mortgage credit was tight in the wake of the subprime crisis. Many buyers in 2008–2012 relied on FHA loans because conventional lending had pulled back. FHA’s market share spiked nationally around 2009–2010.
Montana’s lower-priced market was well suited to FHA loan limits then, and a lot of first-timers used FHA or USDA during those years. As the economy recovered by 2015–2017, conventional loans with low down payment options (like 5% down programs) became more available, and mortgage rates were fairly stable (around 4%).
Comparatively, 2018–2023 saw wild swings: initially an era of very easy credit (record low rates, plenty of loan programs), followed by a sudden tightening (higher rates, lenders more cautious in a cooling market).
Another big contrast is the prevalence of cash buyers – back in 2010, investors were buying foreclosures for cash, but in Montana there were relatively few foreclosures. Most sales involved financing and there were abundant listings. By 2021–2022, cash offers were winning bidding wars on scarce listings.
Policy Responses to Housing Challenges
Housing assistance and policy: State and federal housing support also evolved. Montana did not face an acute affordability crisis in the early 2010s like it does now, so while programs like the Montana Board of Housing’s loans existed, the uptake wasn’t as urgent.
From 2018 to 2023, the housing affordability issue gained prominence, prompting new initiatives. The Montana Governor’s Housing Task Force in 2022–2023, for instance, pushed strategies to boost housing supply and expand financing tools.
There’s also more focus now on workforce housing and “attainable housing” for middle-income families, which wasn’t a headline concern in 2010. In practical terms, this means more creative solutions are being tried (like employer-assisted housing, land trust homes, etc.) to help folks buy, whereas in the earlier period traditional mortgages sufficed for most.
Conclusion
Montana’s budget-conscious homebuyers have navigated a challenging and fast-changing landscape from 2018 through 2023. They faced record home prices, intense competition (often from cash-rich buyers), and rising interest rates that tested the limits of affordability.
Many adjusted by pursuing smaller or more distant homes, tapping low-down-payment loans and assistance programs, or even choosing multigenerational living arrangements to make it work. Owner-occupied purchases remained the focus for most, but the period also saw a spike in vacation home purchases and investor activity that further tightened supply.
By 2023, the frenzy had begun to cool, yet prices stayed high – leaving Montana at a crossroads in terms of housing accessibility for the middle class.
Comparing this era to 2008–2017 highlights just how extraordinary the recent market has been. A decade ago, a steady income could reasonably get a family into a home in most Montana communities. Now, creative strategies and significant resources are often needed to achieve the same goal.
Policymakers and communities are increasingly recognizing this, as seen in new housing initiatives aimed at boosting supply and assisting lower-income buyers. The coming years will determine whether Montana can bridge the affordability gap so that its homeownership dream remains attainable for regular folks.
For now, the trends of 2018–2023 serve as both a benchmark and a cautionary tale – underscoring the resilience of Montana’s homebuyers, but also the pressing need to address housing challenges so that the next generation of buyers is not locked out.
References
- Only Two US Metro Areas Are Affordable for Homebuyers – Planetizen News
- Montana Department of Labor Economy at a Glance – Montana Department of Labor & Industry
- Median sales hit another record high in Missoula, but volume down for third year – Daily Montanan
- Data collection finds just 6% of Missoula home buyers from out of state – KPAX
- How Homebuyers Have Changed in Bozeman, Montana – Bozeman Real Estate Group
- Vacation Home Sales Surges During Pandemic – National Association of REALTORS®
- Montana Housing Market & Mortgage Rates Predictions for 2023 & Beyond – Flathead Valley Mortgage
- Down Payment Assistance – Montana Department of Commerce
- Has Montana solved its housing crisis? – High Country News
- The ‘frozen’ Montana housing market – KPAX
- Property Values By State from 2005-2017 – National Association of REALTORS®
