House Prices Hit $1 Million in One Small US City

Bozeman, Montana, a small city of about 56,000 people, has seen home prices soar on the back of increased migration to the area, catapulting demand for properties.

A single-family home in the area rose by nearly 40 percent to more than $1.16 million as of February, according to the Bozeman Real Estate Group.

The city saw demand jump 60 percent starting in 2021 as home sales increased by 50 percent. The Bozeman Real Estate Group saw interest in properties in the area substantially grow, with queries from people looking to relocate in the area shoot up 300 percent, with helped turbocharge prices. In January, prices peaked at $1.85 million, according to data from Realtor.com.

"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," the real estate firm said in a recent report.

The median sale price of a home, which incorporates single-family properties, condos and townhomes, has increased by 24 percent to $820,000 as of February, compared to a year ago. That's way above the national median sale price of a home, which is at about $418,000, according to data from the U.S. Census Bureau.

The company said that out-of-state wealth, with buyers willing to pay cash for properties, was one of the reasons why home prices have increased. The COVID-19 pandemic accelerated trends of Americans who earn big-city salaries moving to Bozeman, a rural city, bringing with them the purchasing power of a San Francisco and New York resident.

"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?" the Bozeman Real Estate Group said. "Throw in a global pandemic, and all of a sudden working remotely from a place like Bozeman seems like a pretty good idea."

What's happening in Bozeman is a microcosm of some of the trends in the housing market across the U.S. Low supply of homes has escalated competition for properties, shooting up prices. Added to the mix, elevated mortgage prices have made owning a home expensive for millions of Americans.

In Bozeman, like in other parts of the country where mortgage rates are elevated to around 7 percent, demand has slowed, which has contributed to some decline in prices. In 2023, rates soared to about 8 percent, the highest in two decades.

"In 2023 the rising interest rates brought some relief with prices decreasing slightly, but they are still high compared to national housing prices," Bozeman Real Estate Group said. "With the slowdown 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."