Anyone who weathered the storm of the foreclosure crisis can sympathize with the tendency to exercise caution as the housing market rebounds. And while realtors say a run of overly conservative appraisals may have stifled a recovering housing market last year, the figures are now lining up with the purchase price of homes.
Because lending institutions don’t write mortgages above the appraised amount, an appraisal below the agreed-to selling price can scuttle a deal, unless the buyer can summon enough cash to cover the difference between the sale price and the appraisal.
“We were definitely hearing about that for a while but deals in the past month or two the appraisals have not been a factor, and my hat’s off to them,” Bigfork realtor Bill Leininger said. “There was some truth to that but things are getting a lot better. I think they have better numbers to work with, and there are less distress sales affecting pricing and more arm-length transactions.”
Whitefish real estate agent Brian Nicodemus observed a brief trend, but said prices and appraisals are evening out as the market continues to improve.
“We used to see mismatches a while back, but the market is in such good shape right now and there are plenty of comps to justify the purchase price. Appraisals are coming in right around what our contracts are,” Nicodemus said.
Brokers in less diverse markets have encountered problems closing deals when appraisals come in below the price the seller and would-be buyer agreed upon, according to agents, but Northwest Montana is unique for its lack of cookie-cutter homes.
“It’s something they experienced in other markets where you see a lot of houses that are identical in a given neighborhood,” David Fetveit, of Trails West Real Estate, said. “But in this market every property is so unique, everything is so diverse, there are only a handful of neighborhoods where it might be a concern. Ninety-nine percent of the time the appraised value comes back at the purchasing price.”
An annual report released earlier this year supported the theory that the real estate market is recovering. A Flathead County real estate market report released by Jim Kelley of Kelley Appraisal showed foreclosure notices dropping sharply as residential sales rose to a five-year high.
Residential sales in 2012 were the highest since 2007, with 1,332 countywide, a figure that is up 29 percent from 2011 and 46 percent from 2009. Bank-owned properties accounted for 27.6 percent of home sales, which is down from 33.6 percent the previous year, although the total number increased.
Of the county’s sub-markets, Bigfork saw the largest increase. Including the area within five miles of Electric Avenue, Bigfork’s sales rose 76.4 percent from 72 to 127. Sales increased in Whitefish by 17.4 percent, jumping from 218 to 256, and in Kalispell by 26.2 percent, rising from 442 to 558. The Lakeside area saw a 43.8 percent jump, from 48 sales in 2011 to 69 in 2012.
The median price of a home sale in the county hovered around a four-year average at $187,500, which is substantially less than its 2007 peak of $250,000. The median was $160,000 in the Kalispell area; $245,000 in Whitefish; $162,000 in Columbia Falls; $238,840 in Bigfork; and $220,000 in Lakeside.
“I don’t think we are going to see anything happen like what we saw between 2005 and 2007,” Leininger said. “The market in Whitefish is definitely coming out of it faster and there is less urgency elsewhere, but we are definitely coming out of it. Maybe it is moving a little bit slower than we would like to see, but it’s slow and steady.”