Going against the national trend

Flathead Valley seeing shift in housing market

By NANCY KIMBALL - The Daily Inter Lake

The Federal Reserve Board's unexpectedly large half-point drop in the prime interest rate last Monday was crafted, Fed Chairman Ben Bernanke said, as an attempt to contain the mortgage- and credit-crisis fallout.

But the reaction from mortgage lenders and real estate agents in the Flathead is, "What crisis?"

Mortgage professionals, typically a conservative lot here, are dealing with little more than a tighter funding supply for subprime and 100-percent mortgage loans. There are no mass foreclosures sending large numbers of risky-loan borrowers onto the streets. Those with clean credit still are getting home financing.

Likewise, local real estate agents are facing a bit slower pace in home sales from a year ago, but the drop in revenue from those sales isn?t as noticeable.

From August 2006 to August 2007, the number of homes sold through the Northwest Montana Association of Realtors Multiple Listing Service dropped by 45, from 262 in August 2006 to 217 just last month. That?s a 17 percent drop for Flathead, Lake and Lincoln counties.

But the revenue from those sales dropped by just 10 percent. Sales in August 2006 commanded $89,930,000. This August, it was $79,776,000 ? just under $10.2 million less. That's about a 10 percent drop.

The peak in home prices seems to have come sometime in late fall or winter, but now is floating to what many real estate agents see as a more realistic level.

?Prices are starting to stabilize, but that?s just a good market correction,? Kalispell Realtor Ted Dykstra Jr., said. ?We needed a market correction for a number of years.?

He estimated that stretch of too-high prices ran for perhaps the past five or six years.

"The correction started somewhere back in March. April and May were somewhat soft, then June and July were real soft. And August was a lot better than any of the previous months."

Sales this August were ?not as strong as the last four or five Augusts,? Dykstra said, ?but that?s OK.?

Overall, the trend is simply returning homes to the level where they will appraise, he said.

?Prices the last two years were pretty much out of line,? Dykstra said. Sellers had been asking, and getting, prices that were hard to justify by appraisals. ?They were pretty much blue sky.?

Now they?re coming back into line, yet not plummeting as in other hard-hit regions.

Greg Carter of Rocky Mountain Real Estate, which represents some of the larger developments in and around Whitefish, said there?s a logical explanation for that seemingly illogical trend.

?Our area has not experienced the same downturn as the rest of the country,? Carter said. ?We?re in a ?want? market, not a ?need? market.?

Other regions, he explained, have buyers who need the homes as a principal residence. But the majority of people buying here are doing so simply because they want what they see.

?And they?re Baby Boomers with a lot of cash,? Carter said.

Boomers with cash to spend on second homes has translated into skyrocketing prices and a frenzy of new-home building over the past half-decade.

But now, in a slowed-down market with plenty of housing stock to choose from, Carter said, they can take their time and be much pickier on when and what they buy. When they find the right home, they can spend what it takes to snag it ? but, he said, they also can wait for a price drop.

?We haven?t seen this kind of market in a long, long time,? Realtor Dave Alexander said.

From his standpoint at West Venture Properties, Alexander sees ?we?re definitely heading toward a buyer?s market, and coming out of a very long seller?s market ? I don?t think it?s a bad market. It?s a different market.?

Despite some areas that remain slightly stronger than others, the real estate agents say the Flathead holds no real boom or bust pockets.

Dykstra, president of the MLS, shared some numbers:

? Columbia Falls, after a stretch of being beat by Kalispell as the lowest-priced housing market, came in once again with the lowest average home price. In August 2006, 26 homes sold for $8.047 million total, an average house price of $309,500. This August that average dropped to $234,434 when 23 homes sold for $5.392 million. The $75,000 drop was the biggest of any city.

? Kalispell?s average price edged above Columbia Falls this August. A year ago, 103 homes sold for a total of $28.499 million. Last month, 69 homes brought $16.987 million, a $30,500 drop in the average price to $246,188.

? Bigfork was the only other area to drop in its average price. It also was the only area to significantly increase the number of homes sold in August ? from 14 up to 21. Last year?s August sales volume was $7.465 million; this year?s was $10.125 million. That dropped the average home price from $533,214 to $482,142.

? Whitefish sold practically the same number ? 44 last August, 43 this August ? but the volume was phenomenally higher. August 2006 sales were $19.83 million, while last month weighed in at $23.843 million. The average home price increased by $103,800 from $450,681 last August to $554,488 this August.

? Lakeside-Somers, too, showed phenomenal price growth when average home prices jumped by $116,000. Last August, seven homes sold for a total of $3.728 million. This August, only two more homes sold but those nine homes brought $5.838 million. It left Lakeside-Somers with the most-expensive average home price this August, $648,666.

But numbers tell only a portion of the story.

Affordability, as a measure of what real people in the Flathead truly can buy, is an entirely different world.

?Affordable? means little to those migrating to the area and taking $9-an-hour jobs. Renting, Dykstra said, is their only option ? there simply is no housing stock they can afford.

?We are not seeing prices in the $150,000 range even available,? he said, a new phenomenon over the past few years.

It?s due to two factors, he said:

Cost of building climbed with the cost of building materials. A two-bedroom, one-bathroom house will cost $120,000-$125,000 to build now, he said.

Combined with the other factor ? the $60,000-$75,000 cost of a building lot within the city of Kalispell ? it puts the American dream beyond realization in the Flathead for many.

?Until we get to a situation where lot prices come down,? Dykstra said, ?it will be out of reach.?

Alexander watched the same price curve.

?A lot of prices were skyrocketing and dirt became very expensive,? Alexander said. ?It still is, but it?s coming back. I think it will rebound.?

Carter, a land developer in his own right, said it?s going to take a cooperative effort between city and county governments and developers to bring this market around to any range of workforce affordability.

?One of the toughest things now has nothing to do with prices and has everything to do with government regulation,? Carter said.

He sits on the committee which drafted the Whitefish Critical Land Use ordinance now being wrangled through the planning process ? a 24-page draft with 71 pages of augmentation and 13 pages of questions and answers.

?It has developers concerned on what will and won?t get approved now,? he said. ?You?ve got brand new growth policies at the county and city, brand new subdivision regulations at the county. So there?s a whole new world of regulation out there that?s going to affect every developer.

?It?s not good or bad, but it is a major concern. It?s extremely expensive ? to develop,? Carter said. ?And that leads to pricing. We have a plethora of product out there.?

In selling his own home recently, he said he proved a point that pricing per square-footage was the key. He priced his home $128 per square foot lower than the average of the other three properties on his street, and the home sold in five days.

?It tells you there?s plenty of buyers out there,? Carter said.

?So the brokerage community is going to have to be far more capable of talking to sellers and getting them in the right price range.?

Both Dykstra and Carter said smaller lots and fewer governmental requirements ? perhaps allowing multiplexes that make the most of each square foot of land ? will be key to lower-income families being able to buy a home of their own.

?We?re talking affordable housing, but how to get it there? is the sticking point, Carter said.

?Something?s got to give. We?ve got to get to where the cost per lot is less or there?s less requirements on what goes into the land. We can?t force people to sell their land for less, so all we can do is bring down the cost of developing it,? he said.

?When you look at the situation in the Flathead, you have to admit we?re not going in the direction of affordable housing.?

Reporter Nancy Kimball can be reached at 758-4483 or by e-mail at nkimball@dailyinterlake.com