In the last six years, home prices in Bozeman have nearly doubled and the median price of a single-family home is now over $850,000. The last few months have brought some relief with prices decreasing slightly, but they are still high compared to national housing prices. Many people are asking the question, why are homes in Bozeman so expensive? Read this post to find out why!
Bozeman’s real estate market has been facing the ol’ supply and demand dilemma for quite some time, but in 2021 it reached a whole new level. The number of homes available for sale dropped 60% compared to 2020, while the number of homes sold increased by nearly 50%.* As we headed into 2022 it seemed it would be much of the same, however, by summer the number of homes listed in Gallatin County was up 48% compared to summer 2021. This has brought some relief to buyers but supply has not fully caught up to the demand of people buying in Bozeman.
The number of people looking to move to Bozeman increased considerably over the past two years. Our company website traffic doubled between 2020 and 2021, and requests for information about moving to the area increased by 300%. The steady increase in buyers, combined with the lowest number of homes for sale that we had ever seen, drove the price of a home in Bozeman up faster than you can say powder day. As things have calmed down this summer we started seeing prices level out and more price reductions, something we haven't seen much of in a couple of years. As of August 2022, the median price of a home in Bozeman (including single-family, condos, and townhomes) is $743,000 which is still incredibly expensive for most people. See more market statistics here or to see what homes cost in Bozeman right now, click here.
If we are facing such a limited supply of homes for sale in Bozeman, why don’t we just build more? Unfortunately, it’s not that simple. Despite the need for more housing, building codes and requirements in Bozeman are strict, making building new homes in Bozeman a slow and arduous process. It’s also incredibly expensive. There is little land available to build on within city limits and that land is expensive, which means the builder must work the cost of that land into the price of the home. Not to mention, the pandemic has significantly increased the cost of building a home. After mills and factories shut down completely in the early months of the pandemic, we are now seeing shortages in building materials which is driving up the costs. Labor and materials are both in short supply, which means they are more expensive. Supply chain issues are easing, but it will be a while before we see any price changes as a result of this. Click here for more on Bozeman's construction industry.
When people are moving to Bozeman from places where real estate is more expensive, they are able to easily compete in our real estate market, outbidding local buyers and pay all cash for homes. According to Darryl Seymor at Montana Title and Escrow, approximately 45% of Montana Title's closings in 2021 were cash deals. This quickly made homes in Bozeman more expensive. How? When a buyer does not finance their real estate purchase through a lender, they have the option to waive the appraisal on the property. In multiple offer situations (which was happenning a lot in our market) homes would sell for more than what the appraised value would be. For a home buyer who does not need financing, this may not be an issue, but when the next home in that area goes up for sale the appraiser will look at that overvalued home and determine the value of the next home. This caused deregulation in our market and drove home prices up fast. With the slow down in the market, we aren't seeing multiple offers and homes going for over asking as much. Prices are coming down as a result but we have not seen a drastic drop.
Located 400 miles away from the nearest metropolitan area, Bozeman is rural, there’s no doubt about that. But does a rural location matter when there are Zoom Meetings and Google Hangouts along with direct flights to 21 major metropolitan areas? Throw in a global pandemic, and all of a sudden working remotely from a place like Bozeman seems like a pretty good idea. Now we have people living and working in Bozeman while making wages that support a lifestyle in San Francisco, Seattle, or Atlanta. Bozeman was on the map before the Covid hit, but now it has become a destination for even more people. The number of out-of-state buyers in Bozeman has increased significantly in the last year. Our website saw traffic from L.A increase 99% in 2021, traffic from New York increased 48%, and traffic from Houston, Texas increased by 105%. This brought home buyers into Bozeman’s real estate market that had much more buying power than the average local. In 2022, this migration to Bozeman slowed down, but it certainly hasn't stopped. There has been talk recently about the "return to office" now that life is returning to normal. It is hard to say how this will affect people moving to Bozeman if they can no longer work remotely. Our hunch is that it won't have a huge impact right away as companies try to navigate how the return to office will work. Some are facing employee pushback and coming up with hybrid work models. With access to our airport, it is safe to assume people who want to live in Bozeman will find a way to continue to work remotely in some capacity.
While Bozeman used to be a quiet cowboy town, it has now turned into a rural tech hub. In the late 1990s RightNow technology, now known as Oracle (aka the new acquisitors of TikTok) was founded in Bozeman, setting the stage for Bozeman’s future as a tech-town. Since then, powerful tech companies and start-ups have chosen Bozeman as a base camp for their operations. This shift has been great for Bozeman in many ways, diversifying our economy and providing jobs to local workers. But these tech jobs pay higher wages than many of the other industries in the area. According to a study done by the Montana High Tech Business Alliance, jobs in Montana’s high-tech sector paid salaries that were more than double the median earning of a Montana worker. Higher salaries = higher-priced homes.
Bozeman offers the quality of life that many can only dream of. In Bozeman, you will find an incredible community, endless opportunities for outdoor recreation, low crime rates, fantastic schools, beautiful parks, trails, and neighborhoods. While you can’t put a price tag on a community or crisp mountain air, it's safe to say that the quality of life in Bozeman has made it a very desirable area to live.
With all these factors in mind, the real question is, will Bozeman's home prices ever go down? Bozeman's quality of life has been and will continue to be what draws people to Bozeman. As Bozeman grows and changes, some people will find Bozeman less appealing. At the same time, that growth will also make it more appealing to others. With the beautiful mountains, great skiing, fishing, and hiking, Bozeman will always be attractive to those looking for the type of lifestyle that Bozeman offers. Affordability continues to be an issue Bozeman needs to address so everyone who wants to call Bozeman home can, not just the ones who can afford it. Click here for affordable housing solutions that Bozeman is working on.
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