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Housing affordability and Montana's real estate markets.

Article Excerpt
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Introduction

Housing prices in the last 20 years have surged ahead much faster than the income used to pay them. Over the span of time that the median price for a Montana home grew by 96 percent, the per capita income of Montanans only rose by about a quarter as much, or 26 percent. Figure 1 shows the difference in housing prices and income levels in Montana's three Metropolitan Statistical Areas, Cascade, Missoula, and Yellowstone counties.

As public policy issues, housing and housing affordability have always figured prominently in the public debate. In the national economy, housing and housing-related expenditures (including utilities, furniture, supplies, and maintenance) accounted for 42.4 percent of consumers' budgets in 2007, dwarfing every other category of expenditure.

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The recent slump in housing associated with the current recession certainly adds a new twist to this story. Housing price growth has slowed throughout Montana, and in some markets, prices have retreated significantly. But as Figure 1 suggests, affordability involves a comparison of costs to ability to pay, and the recent softness in housing prices has occurred at the same time as income growth has stalled. Also, it will take more than a few years of tepid price declines to significantly alter the effects of almost a decade of rapid price growth.

This article summarizes a recent BBER study on Montana's housing markets, which examined affordability and the factors driving housing price...

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