Northwest Montana real estate sales jump 25 percent in 2005

A billion-dollar market

Population growth, investment buying and limited supply combined to drive sales to unprecedented heights in the Northwest Montana real estate market in 2005.

More than a billion dollars in commercial and residential property changed hands here last year, according to figures released last week by the Northwest Montana Association of Realtors.

That was up 25 percent from 2004 - and double the sales volume from just three years before.

Residential sales jumped 20 percent, from $586.7 million to $706.5 million.

The median home price also rose 20 percent, from $179,000 to $214,450, while the number of homes sold increased 4 percent.

Rick Brunette, with Coldwell Banker Wachholz & Company's Bigfork office, said a number of issues contributed to the record sales.

"First, there's the relocation market - people are moving here," he said. "Northwest Montana has one of the highest population growth rates in the state.

"There's also the investor market. There's a lot of construction and development taking place; contractors are speculating themselves, or investors are buying parcels and sitting on them or building spec homes. We started seeing that a few years ago, but more so in the last year, with people trying to diversify their investment portfolios by including some real estate."

Another critical factor, Brunette said, is that there's a limited amount of private land available in Flathead County. Whether it's waterfront property, rural open space or secluded timberland, the supply is finite - whereas the demand is coming from across the nation.

Consequently, there seems to be little likelihood of a major market decline any time soon.

"Some market segments might stabilize and not have the same level of growth they've seen in the past," Brunette said. "But we still have reasonable property taxes compared to other markets, as well as great services - particularly health care and education. And the Rocky Mountain corridor, from Mexico to Canada, is the most sought-after geography in the nation. Our story here is no different from what other areas are experiencing."

Doug Zignego with Re/Max of Whitefish said local residents are an important part of the market, but they aren't the main reason why this region accounts for a third of all real estate sales in Montana.

"It's hard to quantify," Zignego said. "Gut feel? Maybe 30 percent of the market is locals making a lifestyle change, either scaling down or up, looking to add another bedroom because their family is larger.

"A lot of the people we see day-in, day-out are relocating from other areas. Baby boomers are a big component of the market. They're older, they're looking to improve their quality of life, and what they see here is very appealing."

The same holds true for the younger professionals who are moving in.

"The doctors, engineers and lawyers I've dealt with can work almost anywhere," he said. "What's drawing them here is the quality of life. My guess is that when we started improving our infrastructure, that was the real turning point in the market. People felt more comfortable about coming here. I tie a lot of it back to the decision to improve Glacier Park International Airport."

High-end homes continued to dominate the regional sales figures, as they have for the past couple of years: In 2005, 254 homes accounted for $251.2 million in sales, or almost 36 percent of the total sales volume.

By contrast, homes priced at $500,000 or higher accounted for just 16 percent of sales in 2002.

Price appreciation was evident everywhere.

Even Columbia Falls - long the most affordable community in the Flathead - saw its median home price jump 35 percent in 2005, to $199,250.

That's higher than Kalispell.

"The market finally caught up with this corner of the valley," said Kim Santa at Century 21 Glacier Gateway in Columbia Falls.

"We're still affordable, but as more and more people buy here, they're steadily building more expensive homes," she said. "Prices in Whitefish are so high, people are building here and driving there. We're seeing a number of new homes in the $250,000 to $325,000 range, which is pushing up prices of the surrounding homes. A lot of out-of-state buyers are also looking at this area, because they want to be close to Glacier National Park."

With median home prices pushing $200,000 even in the "affordable" parts of the valley, the current market presents a serious obstacle for first-time homebuyers.

"If they didn't buy a year or two ago, I'm not sure how they're going to manage it," said Julie Plevel with Re/Max Mountain View. "There are some wonderful loan programs out there, but with prices increasing the way they are, there will be a segment of the community that won't be able to afford a home."

Part of the problem, she said, is that existing homeowners who'd like to trade up might not be able to, even if they've built up a lot of equity, because prices have increased so much.

"If these 'second-time' homeowners aren't moving as often, it's going to affect first-time buyers," Plevel said. "It's sad. Those of us in the real estate industry are trying to promote homeownership and the American Dream, but affordable housing is going to be an issue."

And it could be an issue for years to come.

"There was a bit of a slowdown here in the mid-1990s, but since then the market has been steadily increasing," said Tom Marino with Trails West Eagle Bend Realty in Lakeside. He's the current president of the Northwest Montana Association of Realtors.

"I'm not seeing any indications of a downturn or any red flags on the horizon," he said. "The rate of growth may slow, but real estate has always been a great investment, even in bad times. The demand is here, the people, the financing and the technology, so people can work from anywhere. All the factors are in place for this market to keep going."

Reporter Bill Spence may be reached at 758-4459 or by e-mail at bspence@dailyinterlake.com