Flathead’s Housing Market Remains ‘Slow and Steady’
A lack of housing inventory and high interest rates have hindered northwest Montana’s real estate industry, but experts say they expect prices to remain high and warn of future bidding wars once the Federal Reserve lowers interest rates
By Maggie Dresser
When the Federal Reserve started hiking interest rates in 2022 to bring down inflation, Flathead County’s housing market slowed, dipping from its median peak of $690,000 two years ago before flattening.
In Kalispell, the median home price peaked in June 2022 at $647,500 and dropped to a low of $460,000 the following December; prices have since hovered around $550,000, according to Montana Regional MLS data.
As mortgage rates rose from the pandemic-era low of 2% to the current 7%, home prices did drop as the Federal Reserve intended, but not to the extent that many prospective homebuyers had hoped.
Economists and real estate agents say a lack of inventory is the primary barrier to a significant drop in home prices. Many homeowners are hesitant to list their properties in favor of remaining locked into their low interest rates. And while building remains steady, it has slowed down since the pandemic peak.
“I don’t think it’s going to drop,” said Wendy Brown, the supervising broker and owner of Chuck Olson Real Estate in Kalispell. “I think people are thinking we have maxed out and property prices are going to start coming down, but you have a lot of buyers saying ‘let’s wait until prices come down.’ They are not coming down.”
Brown says high interest rates have prevented many of her clients from moving as they wait for rates to come down. When interest rates do begin to drop, however, Brown predicts that bidding wars will return.
“The problem is when interest rates go down, all of the buyers will be competing,” Brown said. “We will end up in a bidding war situation again. All the buyers that were holding back, they are all going to be looking to purchase at the same time again.”
Meanwhile, developers are working to add more inventory to the market. But challenges like construction costs, supply chain issues and labor shortages continue to delay projects and while units are coming online, the building pace is not keeping up with the demand.
In 2020, the city of Kalispell issued a peak total of 406 building permits followed by 300 permits in 2021. Permits have since declined and have hovered around 250 over the past two years.
While the housing market remains strong in the Flathead Valley, Erica Wirtala, of the Northwest Montana Association of REALTORS® (NMAR), says things are cooling off with a reduction in prices, seasonal market changes and more days on the market.
“What I’m hearing from our realtors is that it’s slow and steady,” Wirtala said.
In June 2022, the average number of days on the market dropped to 63 in Kalispell before rising to 132 days by March 2024.
Prices are also fluctuating based on the type of homes available in Flathead County, with the costs of single-family homes continuing to rise while townhouses and condo prices have dropped in the last year.
According to MLS data, the median sales price for a single-family home in Flathead County in April of this year was $674,750, a 16.5% increase from $580,000 in April 2023. However, the median price for townhouses and condos for the same timeframe dropped 21%, falling from $535,000 in April 2023 to $422,500 in April of this year.
Despite the fluctuations, Brown says all homes remain out of reach for many prospective homebuyers. To bridge the affordability gap, she suggests getting creative, like by buying a duplex and getting roommates to help pay the mortgage.
“The story right now is just how extremely expensive it is to buy property anywhere in Montana, but especially in our valley,” Brown said. “My response to that is that over time, real estate typically appreciates. If you wait, it’s just going to get worse.”
