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Missoula County - Missoula Measures

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Missoula Measures - Home Ownership


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Why This Topic?

Home ownership is a foundation for personal security and stability. High levels of home ownership are also the base for stable, supportive neighborhoods. Whatever people buy — houses, condos, trailers on permanent foundations, or town homes — lenders generally require that mortgage payments (which include taxes and insurance) do not exceed 29% of gross income. Obviously, the amount of savings a household has for a down payment will affect what kind of house it can buy with 29% of its income.

How are we doing?

We’re doing much worse than in the 1980s. Overall, the income needed to buy the average house increased 49% from 1990 through 1996, while the mortgage purchasing power of the average wage increased only 16%. As a result, middle income households that would have been able to purchase homes before 1990 in many cases can no longer afford it. One of the major factors in increased housing costs during this time was that lot costs more than doubled. However, increases in home costs have slowed since 1994, and mortgage purchasing power has increased due in part to lower interest rates. Still, our home ownership rates are low. The national average for home ownership is 66%. Because Missoula is a university town with its influx of renters, that level of home ownership may be unrealistic for us.

Indicator

Graph showing percent of owner occupied housing in the City and County.

Related Data

Income Levels and Home Ownership

A family is said to experience cost-burden when their housing costs based, including utilities, exceed 30% of their gross income. In Missoula County, the 2000 Census indicates that more than 25.3% of homeowners and almost 50% of renters were experiencing cost-burden. This is an increase from 1990 Census data, which showed 16.7% of homeowners and 44.4% of renters experiencing cost-burden in Missoula County.

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Graph showing rentals needed  vs. Rentals available.

Sources: Mont. Dept. of Labor, Missoula County Assn. of Realtors, & Missoula Housing Coordinator


Since 1990, the median sales price of a home has increased faster than wage and salary incomes:

Median home sales table
  1990 1998 8-Year % Increase
Median Home Price $77,831 $115,000 +48%
Per Worker Average $22,975 $23,425 +2%

Sources: Missoula Housing Coordinator, Swanson Study, Missoula County Association of Realtors (All $’s have been adjusted for inflation and are expressed in 1998 dollars)

graph home ownership rate US, Montana, Missoula
Missoula Real Estate, Montana Real Estate, Hanley Wood Market Intelligence

The above home ownership rate is the lowest since 1999, and has shown a decline over the past year.  Hanley Wood Market Intelligence

Missoula Consolidated Plan - an extensive study of housing needs and analysis of the housing market.

Brief background

The Challenge of First-Time Home Buyers

Relative to wages, the median sales price for housing in 1998 is almost 150% of what it was in 1990. For homeowners who purchased their homes before 1990, the 150% increase in value can be positive, particularly if they choose to sell their houses, capture their increased equity, and move out of the Missoula area to an area with lower housing costs.

For first-time homebuyers, however, the significant increase in housing costs relative to wages is overwhelming and in some cases impossible to overcome. With no growth in income, moderate-income families can only afford to purchase "less house" (smaller size, inferior quality) than they might have in 1990. For those families or individuals below moderate income, renting is the only option.

Affordable housing: as defined by HUD, housing (rental or home purchase, including utilities) that costs 30% or less of a family’s pre-tax income.

Affordability & Changing Interest Rates

The affordability of a home is particularly affected by changing interest rates. As an example, the following chart shows the impact of interest rates on the amount of a mortgage loan for a household making $30,000/year. As interest rates rise, the amount of mortgage able to be borrowed at the same level of income goes down.

Comparison of Effect of Interest Rate on Fixed 30-year mortgage for income of $30,000, assuming 29% mortgage debt ratio and $130/month insurances and taxes:

Interest Comparison Table
Interest Rate Principle and Interest Payment per Month Amount of Mortgage Loan
10% $595 $67,742
9% $595 $73,913
8% $595 $81,044
7% $595 $89,362
6% $595 $99,167
5% $595 $110,698

Sources: Missoula Housing Coordinator, Swanson Study, Missoula County Association of Realtors (All $’s have been adjusted for inflation and are expressed in 1998 dollars)

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Affordable Housing & Job Growth

One of the primary factors businesses look at when they choose new locations for business expansion is the cost and availability of housing for their employees. Turnover in the work force is less likely to be a problem when wages allow employees to find easily available, affordable housing, and when home buying is possible. Anecdotal evidence suggests that Missoula’s housing costs are having a negative effect on our potential work force, as lower paid workers are pushed out of Missoula to outlying communities, and as middle-income workers are unable to find affordable homes. (Missoula Housing Coordinator 1997)

Economic Diversity

Recent community discussions about Missoulians’ visions of our community have confirmed that economic diversity is a highly prized component of this vision. However, increased housing costs are changing that picture. Like other communities in the Rocky Mountain region, Missoula is beginning to show signs of gentrification; people need higher incomes to afford to live here, while lower income people have to commute from lower cost communities such as Alberton and Stevensville. As people commute from these outlying communities, the amount of pollution from vehicles increases. In theory, the better the mass transportation system, the less money people need for vehicle expenses, freeing up income for rent or mortgages. National data indicate that many households could afford to buy a house if they didn’t require multiple vehicles for transportation. (Missoula Housing Coordinator 1997)

Neighborhood Stability

People tend to be more involved in their communities and neighborhoods when they are home owners. Healthy neighborhoods need a strong core of committed people who are familiar to each other, who watch out for each other and the interests of the neighborhood. A home ownership rate of less than 30% indicates a neighborhood with little stability, 30% to 50% indicates a neighborhood in transition, and a neighborhood with over 50% has the capacity to provide a strong core of committed residents. Several neighborhoods in Missoula now have ownership rates of 30% or less and are beginning to experience neighborhood instability in the form of increased vandalism and crime and high (more than 50%) turnover in school student populations each year. (Missoula Housing Coordinator 1997)

Related Measures

BASIC NEEDS

MISSOULA URBAN ENVIRONMENT

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Related web sites

Missoula Office of Planning and Grants - Missoula Online Statistical System (MOSS)

State of of the Nation's Housing 2012 - Joint Center for Housing Studies, Harvard University

 

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