High housing prices are likely here to stay, but factors such as local land-use regulations are limiting the growth of supply, according to a midyear economic update by the University of Montana’s Bureau of Business and Economic Research.  

The update was presented Aug. 1 at the Hilton Garden Inn in Kalispell and focused on housing affordability in the state, offering insight into possible solutions to boosting the state’s supply of homes. 

Speakers Patrick Barkey, bureau director, and Todd O’Hair, president and CEO of the Montana Chamber of Commerce, presented in six other cities across Montana before arriving in Kalispell. 

Local regulations, Barkey said, can impose building height restrictions, rezoning restrictions and caps on the number of units that end up stunting growth. 

“We should give localities a great deal of discretion on how to improve their restrictions that hold back housing supply,” Barkey said. 

The Republican-controlled state Legislature in 2023 took aim at local land-use regulations, passing a quartet of bills seeking to boost housing construction across the state. Residents opposed to the changes in state law have filed suit.  

Barkey warned localities against adding more regulations that fail to address the problem of supply, recommending that existing policies be evaluated for their effect on housing construction.  

“If it’s not increasing supply, then it’s not attacking the root cause of the problem. And that is too many people trying to get into too few housing units,” Barkey said.  

In the decade leading up to the 2020s, Flathead County saw 6.2% housing growth compared to a 14.8% population growth, according to data from the U.S. Decennial Census.   

There is often support for preserving vacant land, for example, which materializes in the enacting of limiting policies, Barkey said. 

“These restrictive policies exist for a very simple reason, and that is they’re popular,” he said.  

According to data from the National Association of Realtors, the median price of a single-family home in Flathead County in 2024 was around $652,000. 

“It’s not such a great time to be buying a house. I hate to say it,” Barkey said.  

Barkey presented a statewide map that included every county’s ratio of monthly payment to median household income in 2024. Barkey said that a healthy amount spent on rent relative to income would be around 30%.  

Flathead County stood at 68.9%, one of the highest in Montana. Most counties, though, saw a percentage over 30%. 

“That’s a whole lot of counties where the median price person can’t qualify for a mortgage and the median priced house,” Barkey said. 

Data collected by the bureau showed an acceleration in single-family housing prices post-pandemic within the Flathead Valley and other counties in Montana. Those prices continued to increase despite mortgage rates increasing.  

“Those higher rates have kind of locked-in the market,” Barkey said.  

While Barkey expected that higher mortgage rates would depress demand, “what we didn’t anticipate is how much they depress supply.” 

The normal turnover for housing has “slowed down like crazy,” Barkey said, because people feel locked-in and are avoiding the “full wrath of market rates.” 

High housing prices, which Barkey defined as “prices that we think are higher than what markets would produce,” have created sprawl as people get pushed out, increasing commuting costs and making it difficult for businesses to find workers. 

“When you can’t make that move because of housing costs, that’s a loss for the economy,” Barkey said.  

The housing market favors the older generation of homeowners, presenting an obstacle to younger people getting into the housing market, according to Barkey.  

A normal housing market, defined by Barkey, is one that has enough vacancies so that regular turnover of property takes place, allowing people to move more freely.  

High prices are not limited to Montana. Barkey indicated that while inflation is fading, high prices across the country are not.  

Data presented by Barkey also forecasted slower growth in the state next year in employment, personal income, wage and salary. Montana added around 10,500 jobs last year, slightly less than the year before. Barkey compared the leveling off as an airplane reaching cruising altitude. 

O’Hair was on hand to discuss the development of Headwaters Tech Hub, a Montana-based program designed to advance autonomous systems, biotechnology, agriculture, critical resource management and other technological innovations.  

The hub was established through the 2022 CHIPS and Science Act, according to O’Hair, and received 1 of 21 national awards, “funded to the tune of $41 million.”  

"We're in some growing pains right now, and it's not comfortable. But I have huge confidence that we're going to be able to solve these challenges," said O'Hair regarding how the tech hub will play a role in Montana amidst the housing crunch. 

Jack Underhill can be reached at junderhill@dailyinterlake.com and 758-4407.