In his 43 years selling real estate in Billings, Bob Leach has seen dramatic swings in the housing market. He was there in the 1980s when interest rates hit an all-time high of nearly 19% on a 30-year mortgage. He was there for the 2008 recession and remembers how the community was affected when home sales collapsed.
Now Leach is living through another time of rapid change. The Wall Street Journal recently named Billings as the No. 1 emerging housing market in the United States. The rankings, published July 20, analyzed economic data and housing metrics. “The index identifies the top metro areas for home buyers seeking an appreciating housing market and appealing lifestyle amenities,” housing reporter Nicole Friedman wrote. According to the article, Billings’ rank was boosted in part by its appeal to remote workers and the city’s low unemployment rate, which the Bureau of Labor Statistics pegged at 3% in May.
The picture Leach sees isn’t so rosy. Over the past several years, and accelerating since the start of the pandemic, Leach said, home prices are surging as demand rapidly outpaces supply in the Billings area.
“We’re shutting out a whole host of people from being able to afford housing,” he said.
Montana’s natural amenities and wide-open spaces are drawing an increasing number of new residents, causing shortages of workforce housing in several areas of the state and making some places unaffordable for many. While the housing market in Montana’s largest city is not yet as hot as Missoula’s, Bozeman’s or Kalispell’s, the trendline points to a simmering question: Is Billings next in line for a housing crisis?
From 2012 through 2017, Billings had a steady increase in housing prices of 2% to 3% annually, according to Leach. In the summer of 2020, though, demand began to skyrocket, and prices followed. Leach, Multiple Listing Service chair of the Billings Association of Realtors, said the average sale price for a single-family home in the Billings area jumped from approximately $294,000 in 2020 to $342,000 in 2021, an increase of more than 16%.
If this trend continues the way that it’s currently going, it’s just not sustainable for the average individual to be able to afford homeownership.
That jump could affect many people who hope to own a home in Billings, where the median household income is just under $60,000, according to the most recent census data. For house-hunters with an income between 80% and 120% of the median, or between $48,000 and $72,000, Leach said, a price between $240,000 and $320,000 would be considered affordable.
“If this trend continues the way that it’s currently going, it’s just not sustainable for the average individual to be able to afford homeownership,” Leach said.
Billings Mayor Bill Cole has overseen the city’s growth for the past three years. Citing the city’s low unemployment rate and relatively small size compared to other national metropolitan areas, he said it makes sense that people want to move to the area.
“People are recognizing the benefits of living in Billings,” he said.
Even so, Cole doesn’t believe that home prices will necessarily continue to soar at their current rate. He said the city is focused on land-use regulations to incentivize developers to create more diversity of housing in the coming years.
“We need a broad variety of housing types, from the very top end of the market to affordable rental units,” he explained. “We need to make sure we cover the whole spectrum, and government can help that through good planning, reasonable regulation and a customer-orientated approach that creates public-private partnerships with developers so that we can build the community together.”
“We’ll see a gradual return to normal of housing prices, but it’s going to take a year or two before that happens,” he said.
Big Sky Economic Development, a public-private partnership established by the Yellowstone County commissioners, is one organization working to help prevent housing problems in Billings from reaching the crisis levels currently seen in some parts of Montana.
BSED worked with the Billings Association of Realtors and other community partners to host a Housing Strategies Summit on Aug. 24. During the event, local experts, including professors, bankers, community leaders, real estate agents and developers, explained what they regard as the most pressing issues in the housing market, and what might be done to alleviate them. Among the concerns are lending and regulation challenges and a lack of skilled workers.
In an interview, BSED Director of Community Development Dianne Lehm said the current housing situation needs to be addressed from a variety of angles, with city government, nonprofits and developers working together.
“I think it really is the responsibility of all of us,” she said.
We’ll see a gradual return to normal of housing prices, but it’s going to take a year or two before that happens.
Building more dense housing units in the core of Billings, for example, could provide numerous opportunities for the community, she said, bringing more people into the heart of downtown, revitalizing the area and driving economic growth while appealing to younger workers seeking a more livable and walkable community. One focus for BSED is looking into the expansion of mixed-use properties with small businesses or retail at street level and apartments above.
“I wouldn’t say there’s any area that wouldn’t be ideal for developments,” Lehm said. “I would think we’re going to see more housing choices for downtown.”
Lehm also pointed to more innovative ways of addressing housing shortages than single-family home expansion in the suburbs. Land trusts, housing co-ops and redevelopment of downtown could all be parts of the solution. Several of those methods are being explored through small-scale programs in other Montana cities. Both Kalispell and Red Lodge have begun land trust programs to develop affordable housing.
Most new housing in Billings over the past several years has been built on the west end. Rod Wilson, a developer and real estate agent for the Trails West subdivision, has been ramping up expansion of the development to meet increasing demand. While Wilson built about 15 new homes annually in the past, he’s increased the pace to 24 homes annually over the course of the pandemic. He’s now breaking ground on a new house about every two weeks.
While Trails West has been growing, it and other developments still can’t provide enough homes to maintain a healthy market for everyone who is currently looking, according to Wilson. Researchers and real estate agents typically consider a six-month supply of housing stock a sign of a balanced market. That number is determined by comparing the average number of homes sold in a given period with the number of available homes on the market. For example, if 20 homes were sold in a community in the previous month and 80 homes are on the market, the community would have a four-month housing supply. Wilson said current supply in Billings is about three to four weeks.
Wilson said he’s raised home prices in Trails West by about 20% from pre-pandemic levels, which means the cost of a home in the subdivision is now between $390,000 and $450,000.
“We’re just going as fast as we can,” Wilson said.
Hank Jagodzinski reported this story in conjunction with the Rural Journalism Camp he attended at Montana State University this summer. Hosted by the Yellowstone Writing Project, the camp was sponsored by the MacArthur Foundation and led by Alan Hoffmann, a high school English teacher in Savage, Montana, and veteran Bozeman journalist Nick Ehli.