By the Missoula Organization of REALTORS®
The excitement and energy that Missoula’s University of Montana brings, also comes with a tradeoff. As a community, we have far more renters than the national average, making the rental market even more competitive. According to the 2011 Missoula Housing Report, the split is about 50/50 renters versus owners. On a national level that rate hovers on the side of home ownership at about 65%.
Adding to the student factor is that housing prices that have been, for many years, out of reach for many individuals and families that live here. The high cost of housing has forced residents to rent when buying might have been their ultimate goal, further straining the rental market. According to the Housing Report, vacancy rates for rentals are perched around 3%.
What has happened since 2007? A decrease in the cost to purchase housing in Missoula. While I cannot report on that trend locally yet for 2011, on a national level, a survey found that 48% of respondents reported that they saw rental rates increase. For many, that means they can now carry a mortgage for the cost of what they had been paying in rent.
In addition, home ownership is still a priority for US citizens. A majority of renters aspire to home ownership as a long-term goal. According to the “2011 National Housing Pulse Survey” released by the National Association of Realtors, 72 percent of renters surveyed said owning a home is a top priority for their future, up from 63 percent in 2010.
Fun facts on renting versus buying:
- Median Price of a Home: $200,500, down from $219,550 in 2007.
- Housing Affordability Index for Four Person Household in 2011: 107, meaning they can afford 107% of a median priced home.
- Mortgage Interest Rates: hovering around 4.25%.
- Rents: increased in 2010 to an average of $740 per month from $710 in 2009.
- At 4.25% interest, $740 per month carries an approximately $150,000 mortgage.
- The average rent of a 3 bedroom house is $1,100 per month, which at 4.25% interest could carry a $225,000 mortgage.
While the decision to rent versus buy is not simple, nor has the same deciding factors for each family, we can tell several things. First, despite the burst of the housing bubble and a lot of bad press, home ownership is still a high priority for most renters. Second, as rental rates climb, and both housing prices and vacancy rates drop, we will begin to see individuals move back into the ownership market. Finally, it seems that Missoula is poised to see changes in the way individuals view renting versus home ownership, and it will be interesting to see what happens next.
Diane Beck has been selling real estate in Missoula for over 20 years. Her knowledge, experience and commitment to the community has placed her in the forefront of the real estate market. Diane is serving the Missoula Organization of REALTORS® as their 2011 President and she continues to strive for the best interests of their members, community and her clients.