Home sales down while multi-family units continue to dominate Flathead Valley market

A stagnation in single-family home sales and construction that occurred in 2023 is likely to continue into the new year, while multi-family housing units could continue to dominate. 

High interest rates coupled with shortages in skilled labor have influenced development projects in the Flathead Valley toward more concentrated multi-family units, according to city officials, real estate agents and builders. 

According to Lakeside real estate agent David Fetveit, home prices have plateaued for about 13 months now, and while interest rates haven’t budged, the election year in 2024 and other variables are likely to have an impact on sales. The 30-year fixed-rate mortgage rate fell to an average of 6.67% as of Dec. 21, according to Freddie Mac, following a downward trend after 17 consecutive weeks above 7%. 

The housing supply in the Flathead Valley is healthy enough, according to Fetveit, that a homebuyer could swap one house for another of the same price, but “interest rates are such that it would double your payment. No one wants to do that.”

The housing supply — how many houses sold the month before versus how many are left on the market — has increased when compared to previous years. 

“When supply got super low in 2021, 2022, we were down to a two-month supply of properties,” Fetveit recalls. “As of October, we’ve got a five-month supply.” 

When comparing total home sales, according to data from the Northwest Montana Association of Realtors, sales in Flathead County have decreased for the third year in a row. The total sales for this year was 1,165 homes compared to 1,789 in 2022 and 2,545 in 2021 and a peak for the last decade in 2020 at 3,765 homes sold. 

Sales for Kalispell dropped from 894 units last year to 601 through the third quarter of this year. 

Similarly, Whitefish total sales dropped from 399 to 249, and Columbia Falls fell from 193 to 112.

And Fetveit expects single-family homes being used as short-term rentals will continue to generate profits for property owners — and tie up much-needed housing for renters — until more hotels are built. 

If sales on existing homes are slowing, construction of new single-family homes in Flathead Valley could be further evidence of a slowing market. 

Kalispell has issued 114 building permits to date for single-family homes in 2023, compared to 136 for the whole of last year. Permits issued for multi-family units have increased from 466 last year to 515 through mid-December of 2023.  

Development Services Director Jarod Nygren cited a theory that people tend to move upward into new homes, freeing the one they had for someone else, but said for now “people are holding onto what they have.” 

“Given the interest rates, the numbers are not as far down as I thought, certainly way down from 2021. The migration because of COVID made us the fastest-growing micropolitan area in the United States. That wasn’t sustainable.”

“There’s a level of caution, but people aren’t really pulling the plug on projects either,” Nygren added.  

The cost of living in Flathead County was found to be 8.6% higher than the national average in the first quarter of 2023, according to Kalispell’s Pathways to Removing Obstacles to Housing grant application from November 2023. The higher cost of living in tandem with a high level of low-paying service jobs makes the need for more affordable housing options in Kalispell critical, the document notes. 

Nygren reports that despite the rise in construction costs and a slowdown in migration to the valley, more units are scheduled to be completed in the near future. 

One such project expected to wrap up in 2024 is the Silos apartments at Fifth Avenue West and Center Street. The mixed-use residential and commercial project that sits adjacent to the city’s Parkline Trail is planned to have 230 apartments.

Over the past decade, Kalispell rental housing has been below 2% vacancy rate and at or near 0% vacancy rates at times, according to the city. 

Currently, about 800 units are under construction, and Nygren reports that however gradually they are completed these housing units should be completed throughout 2024 and into 2025. How those new units will impact a shortage of housing could be realized as early as next year. 

“Whether there is an impact — are they starting to see vacancies or not — I think 2024 will be a pretty telling year,” Nygren said.

According to Kalispell’s housing grant application, the city approved 4,817 housing units between 2018 and 2022 which equates to 46% of the housing supply previously constructed in the city over the previous 126 years. However, due to supply chain issues and limited labor the units could take years to come to market, the city notes. 

“Multifamily is the largest component of the supply hitting the market, but the city has approved housing for all income levels, all housing types,” Nygren says, judging the broad spectrum of housing types to be “pretty remarkable.”

Nygren anticipates a slowdown in housing construction on the horizon. 

“We can’t build any more with the market we have, whether there is a demand or not,” he said. 

In Columbia Falls construction has been slow. The city tracks its building permits by fiscal year, which runs July 1 through June 30. 

Columbia Falls issued four permits for single-family residences for the most recent fiscal year compared to the previous year’s total of seven. For the last two fiscal years, the city has not issued any multi-family unit permits. 

Susan Nicosia, Columbia Falls city manager and planning and zoning administrator, noted that the flow of permits has slowed considerably, but the city is anticipating a permit for 12 townhouses on Fourth Avenue West and Eighth Street West in the spring.

On the commercial side, a building permit has been issued for the 65-room extended-stay hotel at the Glacier Inn Motel site in Columbia Falls with construction expected to begin in the spring of 2024.  

Building permit numbers for Whitefish were unavailable. 

Construction of custom homes and multi-family units is way up, according to Mark Freidline, executive director of the Flathead Building Association, while there have been fewer production built homes, which are typically quicker to fill up bare land due to their simple and similar floorplans. 

He points to a shortage of skilled labor that will continue to affect prices in 2024. He attributes part of the valley’s high housing costs to the unmet demand for skilled laborers.

“Projects are lined up everywhere,” he said. “We need painters, framers, drywallers and so on to move things forward.” 

At Northwest Montana Association of Realtors, Public Affairs Director Erica Wirtala says the shortage in skilled labor creates a hardship for selling bare land. 

“If there is no local talent that already has a place to live, then it is extremely difficult to get anybody in,” she said. “The wages don’t pencil.”

The last 10 years have seen home sales under $150,000 drop from 218 in 2013 to four in 2022, according to NMAR data, while homes costing over $1 million in the last decade continually rose until 2021 when 324 sold, dropping to 293 in 2022. 

Despite the smaller number of sales, the median home sale prices in Whitefish and Columbia Falls both increased this year. Through the third quarter of 2023, Columbia Falls had a median price of $625,000 compared with $550,000 in 2022. Whitefish’s median rose to $907,000 through the third quarter of 2023, up from $835,000 last year. 

Kalispell’s median home price through the third quarter of 2023 stayed nearly unchanged from the entire year prior. The price only increased by $6,000 this year compared to the median price in 2022 of $530,000. 

Wirtala believes that Kalispell is on the right track approving a flurry of new housing and that it may have helped ease the extreme pricing in the last two years. As evidence, she notes that “for a good part of the last year, housing prices were higher in Columbia Falls because they had so much less inventory to work with.” 

Wirtala finds a correlation between housing difficulties in the Flathead Valley and national trends, saying that what happens at the national level can be slow to arrive in Montana but lingers longer after the crisis has passed. 

“Flathead is late to the party and stays a long time,” she said. 

Reporter Carl Foster can be reached at 758-4407 or cfoster@dailyinterlake.com.

    A home for sale in the Mountain Vista Estates development in Kalispell on Friday, Dec. 15. (Casey Kreider/Daily Inter Lake)
  

    Newly built homes in the Eagle Valley Ranch development off U.S. 93 in Kalispell on Friday, Dec. 15. (Casey Kreider/Daily Inter Lake)
 

The Parkline Towers apartment buildings under construction along the Parkline Trail in Kalispell on Friday, Nov. 3. (Casey Kreider/Daily Inter Lake)
Casey Kreider

  

    A home for sale in the Silverbrook Estates development in Kalispell on Friday, Dec. 15. (Casey Kreider/Daily Inter Lake)