Though mid-summer temperatures in the Flathead are heating up, one thing is cooling down: the housing market.
For the first time since before the pandemic, residential and land sales are falling in the Flathead Valley, with 2022 first- and second-quarter numbers dropping considerably from the same time in prior years. Meanwhile, Flathead residents continue to battle the confounding issues of limited housing supply and exorbitant prices.
Patrick Nagle, Whitefish resident and independent real estate broker, said that he began to see the market drop off substantially around May. Both home sales and prices fell in the area, a phenomenon he attributes to a number of factors, most notably inflation-curbing policies implemented by the Federal Reserve.
“With rising interest rates, we’re seeing buyer apprehensiveness to engage in the market,” Nagle said.
In the first two quarters of 2022, Flathead County saw 845 residential home sales, compared to 1,195 in the same period in 2021, 966 in 2020, and 889 in 2019. Land sales dropped even more precipitously, with 254 land sales in the first two quarters of the year, compared to 557 in the same period in 2021, 304 in 2020 and 275 in 2019.
The Flathead’s falling sales mirror overarching national trends. In May, sales of existing homes in the United States were 8.6% lower than a year ago, dropping to 5.41 million units. Building new homes has stalled as well, with national single-family home construction down 15.7% from last year. As inflation drives up the cost of home construction, many projects sit unfinished, as developers cannot afford to see them through to completion.
“We’re still seeing a big demand in the need for houses,” Mark Kuhl, owner and supervising broker at Performance Real Estate in Kalispell, said. “We still have a huge buyer demand and a lack of inventory.”
While price decreases may seem promising for those seeking to find reasonable housing options, Kuhl says they are simply a readjustment of costs that were exorbitantly inflated during the pandemic. Though lower in price, homes in the valley remain largely unaffordable to many and are coupled with high interest rates.
The sharp turn in Northwest Montana’s housing market comes on the heels of a pandemic-induced real estate boom, during which many out-of-staters moved to the region to work remotely and escape crowded cities. In 2020, Montana saw a net gain of 6,661 partial-year state tax filers, a sizable share of whom moved to the state from California, Washington, Colorado and Oregon. Flathead County saw 4.5% of such tax filing growth. The average income for new arrivals during the pandemic months was around $110,000, higher than the average Montana resident earns.
Nagle said he sold properties to a number of buyers from Seattle, Texas, the Bay Area and Southern California during the pandemic, many of whom he said sought out investment properties to build “dream homes.”
He anticipates that as supply continues to drop and prices remain inflated, wealthy estate buyers will be able to weather the tumultuous market much more easily than middle- and working-class residents of the valley.
“I think there’s going to be a reckoning that’s coming within the next year,” Nagle said. “Cash is going to be king. We’re definitely seeing people falling out of the marketplace. They’re just not competing.”
Nagle explained that while Whitefish’s status as a resort town “hangs onto its value” more easily, helping its real estate market remain relatively hot despite national downturn, the same is not true in the rest of the valley.
“The fallout is occurring more in Kalispell than it is in Whitefish,” he said, adding that “it doesn’t look good” for those seeking out affordable housing options.
Nagle expects home sales will decline further into the fall, as inflation and interest rates continue to strain Americans’ buying power.
“The valley is wrestling with some big changes,” he said. “It’s going to be a lean year and people are reexamining their financial focus.”
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