As Home Prices Drop, Some Buyers See Opportunity

By Beacon Staff

A slowing economy and the troubles plaguing the national housing market have potential buyers in the Flathead Valley tip-toeing around home and building investments at a time local professionals say they should be jumping in.

“In terms of times to rock and roll, this is as good as it gets,” Steve Paulson, a mortgage banker with Mann Mortgage said.

Interest rates are falling fast and furious. Building supplies like lumber and labor costs are at their lowest prices in years. Housing prices are dropping drastically throughout the valley. The result, area real estate, building and lending professionals say, is an unusually good market for those interested in buying or building a house.

“Smart buyers and sellers, whether it’s real estate or anything else, always try to take advantage of uncertainty,” Tom Burk, president and CEO of the nine Wachholz Group offices of Coldwell Banker Real Estate in Whitefish, said. “Right now, because it’s very much a buyer’s market, a buyer controls the uncertainties.”

Nationally, home sales declined dramatically last month and housing prices posted their sharpest decline in four decades as a slowing economy discouraged many potential buyers. The Flathead market has fared better than many in recent months, but is not immune from the downturn – especially in the case of higher-end homes.

Homes sold in Whitefish were down 31.4 percent, Bigfork 46 percent and on Flathead Lake 33.3 percent, according to a mid-year report by Jim Kelly, who runs a real estate appraisal and consulting firm in Kalispell.

The good news for buyers is that home prices in several areas throughout the valley have dropped as well, said Kristi Bruyer of Chuck Olson Real Estate in Kalispell.

Harder hit areas include Lower Valley, down 48 percent; the summit of Big Mountain, down 34 percent; and southwest Whitefish, down 26 percent, according to a year-over-year comparison from Bruyer. Average sale prices in Kalispell are down about 6 to 11 percent, though the west urban area of town posted a 4 percent climb.

“But we’re seeing things definitely coming down in prices all over,” Bruyer said.

At Whisper Creek Log Homes, Paul Clark described the market changes as “the perfect storm” of opportunity for those thinking about building.

“If a person is in a situation where they feel they are financially stable, now is the time to take advantage,” he said. “It’s extremely rare to see this many factors come together at once.”

Lumber futures, which are traded on a commodity market, are going at prices similar to where they were in the mid-90s, Clark said. Low oil prices have cut gas-related building expenses. And as the relative building boom of recent years has subsided, subcontractors and laborers have found themselves short on work and dropped costs in an effort to stay competitive and busy.

And helping everything along are lower interest rates.

The Federal Reserve lowered its benchmark interest rate virtually to zero earlier this month and declared that it would fight the recession by pumping money to businesses and consumers through an expanding array of new lending programs.

It also announced it would “employ all available tools to promote the resumption of sustainable economic growth,” including buying “large quantities” of mortgage-related bonds. That move, Paulson said, pushed mortgage rates temporarily below 5 percent two weeks ago – an astonishing, and extremely rare, low. They’ve since returned to a still-low 5 to 5.5 percent.

“Once we’re getting down around 5 percent, I can count the number of times that happens on one hand,” Paulson said.

Paulson added that loan programs that benefit first-time home buyers such as the Federal Housing Administration – a 3.5 percent down payment – and the USDA Rural Development program – a zero percent down payment – have also been changed to help more people.

There’s no guarantee that the market won’t drop lower before its inevitable rise, Burk said, but encouraged people to take a “long, hard look at buying.”

“No one can tell you, ‘Yep, today’s the day they stop falling,” Burk said. “But once that uncertainty is gone, you’ve missed the window.”