It’s no secret that real estate in the Flathead Valley has been booming for several years, but a change in the market could be coming.
Many factors, including the COVID-19 pandemic, have contributed to urban flight which has seen buyers buy properties without seeing them and pay cash far more than the original listing price. The feeding frenzy has sent home prices skyrocketing, but local estate agents and mortgage brokers believe price drops are on the horizon.
“The median home price in Kalispell is $525,000, which is down from what it was a few months ago when it was in the low six hundred,” says Erica Wirtala, director of public affairs of the Northwest Montana Realtors Association. “I think Whitefish went down a bit, they were at a median house price of over a million. Now they’re around $840,000 – and that’s for one bedroom and two bathrooms – it’s just your average median home.
Home sales data over the past three years paints a dramatic picture of rising housing costs in the Valley. According to Montana Regional MLS, the median selling price of a home in Columbia Falls in June 2020 was $289,000, which peaked in May 2022 at $751,000.
In Kalispell, their median sale price was $315,000 in June 2020. Kalispell reached record prices in June of this year at $650,000.
In resorts like Bigfork and Whitefish, the price increase is more significant. In June 2020, Bigfork’s median home sold for $363,000, that price nearly tripled to its peak in April of this year at around $1.1 million. In Whitefish, the median price was $425,000 in June 2020 and peaked in August this year at just over $1 million.
Those high prices have started to come down from their peak – now most places sit with a median home sale price between $500,000 and $800,000.
SLOWDOWN The decline has real estate agents speculating that high house prices in the valley are now down, but that hasn’t stopped many sellers from trying to participate in the gold rush.
Real estate broker David Fetveit said he will ask sellers what they would like to list their home for, warning them they should be prepared to cut prices.
“We’re going to start where the prizes were, you know, what your stretch prize would be. But I always tell them in advance to be ready to make price reductions. If we don’t get offers within the first 30-45 days, we need to start lowering the price and trying to figure out where the price is, where the market is for that property,” Fetveit said.
But the price cuts open the door to more typical homebuyers – someone looking for a 30-year mortgage. David Boye, a Black Diamond Mortgage broker in Whitefish, said people who had trouble getting a loan might have a better chance of finding someone to work with them.
“If you had credit issues, you might not have been able to find a loan officer willing to help you get a loan in 2021,” he said. “Everyone is busy with easy money, so they’re not that motivated to work with someone who needs more time.”
But as the market evolves, it can be beneficial for future homeowners who have had a harder time getting a loan.
“Obviously everything is probably a little worse (than before the boom) but the desire to work together is there for me to work with them and the desire for them to put in the work,” Boye said.
This job means saving for a down payment and maintaining good credit for those wishing to buy property – being prepared at all times, because even if the market is cooling, it is still quite warm.
TIME of the year in which sales take place has also changed.
It used to be that winter meant a time of respite for the Flathead Valley real estate market, Fetveit said, but in recent years he and other realtors have kept busy regardless of the season.
“Back when we had normal market cycles, things slowed down in the winter. Mainly because a lot of them, the second and third home market – those people just wouldn’t be here for winter shopping. But all bets were off in 2020 and 2021, there was no difference between seasonality. If there was one on the market, people would buy it,” Fetveit said.
Professionals predict that other factors like supply and demand and high interest rates will do more to affect the market here.
The Federal Reserve decided to raise interest rates this summer in an effort to reduce high inflation. Currently, the interest rate on a 30-year fixed rate mortgage is just over 7%.
Boye said it didn’t have as much of an impact on people who were looking to buy a home but couldn’t when the market was most competitive.
“People who have not been able to access the property are concentrated. So people with credit problems or for some reason in their life they couldn’t qualify for the loan, they are ready to accept the higher interest rates or the higher prices because they want get a house,” Boye said.
Experts are urging first-time home buyers to be patient and prepare for the perfect time to make an offer.
PLAN A A 15% to 20% drop in house prices in the Valley, Boye still does not expect a real estate crash like in 2008.
He said that when it comes to this market crash, supply and demand played a much bigger role.
“If you go back to 2008, we had massive supply and few buyers. So we oversupplied the housing economy and then it crashed. In this case, you have a lot of people who want to become homeowners and they’ll literally go house hunting and there’s nothing available,” Boye said.
He said the Valley in particular has a supply and demand problem for single-family housing. He said that in the 26 years he has lived here, the biggest challenge he has faced in getting proper inventory is the time it takes for a developer to go from thinking about creating housing to the placing on the market. He said he hadn’t seen a serious attempt by communities to set aside certain areas to become high-density housing.
“The problem is always that no one wants high density development in their backyard. But high-density development is always the solution because it solves the supply problem, right? But you have to pick a few places in your community and say, “We need to put high-density housing in certain areas,” and the harder it is for a developer to get that, the longer it takes, and the longer it takes more of the problem it is. So it’s always too late – whenever we have a high demand for housing, we don’t have enough housing,” Boye said.
