Home prices surge in 2016; another good year on tap
The Flathead Valley real-estate market is poised to see another strong year for sales and new development after home prices surged in 2016, according to a recent report from Kelley Appraisal in Kalispell.
In Kelley Appraisal’s year-end report, owner Jim Kelley provided a snapshot of how the market behaved in 2016 compared with previous years and gave a look forward to 2017.
“Last year was a pretty good year overall,” Kelley said in an interview, making note that residential sales were on par with a strong 2015, and that the median price in the valley increased by about 5 percent to reach record levels.
Some of the highlights from 2016, according to Kelley’s report, were increased new home construction, a decrease in foreclosures and new interest in development. Flathead County had 830 new residential units, up 11 percent from the previous year.
While 2015 was the best year for homes sales since 2006, last year fell short of that mark by only three sales for a total of 1,680 homes sold.
The median sale price in the county was 5.2 percent above the previous year, at $255,000 — the highest price it has ever been, including the record high of the pre-recession boom, which was $250,000.
The Kalispell area saw the greatest surge in median price, increasing 9.1 percent to $206,775. The Whitefish area rose by 7 percent, with the median price at $334,500. The sales volume within Whitefish city limits soared to 194 total sales, 39.6 percent higher than 2015. Although the sales volume for the Whitefish area, including 3.5 miles outside of city limits, dropped 0.7 percent, for a total of 290 sales.
Columbia Falls and Lakeside did not have the same surging increases in price, but still surpassed 2015’s median, increasing by 1.7 percent and 1.3 percent, respectively. Bigfork’s median sales price was $300,000, 7.9 percent higher than the previous year, according to the report.
Areas where Flathead County saw a decline were commercial property sales and subdivision activity that is close to an all-time low. Kelley also stated in his report that as interest rates begin to increase, the affordability is being surpassed by prices, putting some pressure on the housing market.
The overall 30-year interest rate in 2016 was 3.7 percent, the report stated, but the current interest rate is 4.1 percent.
“We’re starting to see some separation in median home price and affordability as interest rates go up,” Kelley said, adding, “We’ll maybe have a couple of small rate increases this year, I don’t think it’s going to have a material impact on affordability, but we really don’t know the median income [for last year], so we really don’t know the affordability.”
The median income for 2016 will not be calculated until after the tax season, but if the median household income has increased, the separation between affordability and the median home price may be less than projected, Kelley said.
Kelley compared this separation to 2005, prior to the collapse of the housing market. Still, he added that this is nowhere near the degree of the collapse and should not be cause for concern.
Kelley doesn’t believe a potential increase in the number of short-term rentals in the valley will have a major impact on the market.
“The rental market is really tight right now. There is a need for additional rental units in the valley,” Kelley said. “With websites like Airbnb and VRBO, I don’t think that has an overall material effect on the market.”
A key point to watch out for throughout 2017 is the ratio of inventory to the number of sales, Kelley said.
“Inventories go down, and the number of sales increases, that shows good demand in the market,” Kelley said. “My guess is, based on the information that’s available now, because inventory levels are at an all-time low level, 2017 looks like it’ll be another good year.”
In addition to his annual report, Kelley also publishes an online monthly update on the market trends in the valley, which can be found at http://kelleyappraisal.net/MarketTrendUpdates.pdf .