While the Flathead Valley’s real estate market remains tight, housing experts said at a Sept. 19 Kalispell Chamber of Commerce luncheon that inventory is starting to rebound as peak-pandemic home prices cool off and high interest rates slow down buyers.
“A couple of years ago in 2021, we had probably less than 1% of inventory in our market for buyers,” Linda Pistorese, owner of Flathead Valley Brokers, said. “But with that being said, we’re starting to see inventory stabilize to what we consider normal in our market with three to six months worth of inventory … so that’s really good news for buyers.”
As development dominates the growing Flathead Valley, Pistorese said new construction sales account for significantly more of the market than it has historically when compared to existing homes. This year, the price point margin between new builds and existing homes was only $30,000, which has resulted in buyers trending toward new construction nationwide.
“So that was really interesting,” Pistorese said. “As well as the fact that normal new construction is usually 10% to 15% of our overall market.”
According to a National Association of Home Builders report released in July, nearly one third of all home sales were new construction.
“That’s a really big number,” Pistorese said.
While existing home prices have come down from the pandemic peak, which was $655,700 in Flathead County, the costs have only decreased by about 5% from their all-time high last summer. With high price points, Pistorese said buyers have become pickier as they wait for interest rates to stabilize. Once this happens, she predicts existing homes will return to compete with new builds.
At Northwest Montana Association of Realtors (NMAR), Jeri Moon said the housing market was saturated with homes up until 2014 but in 2015, Flathead County’s market supply started to become stagnant as new residents moved to the valley and building slowed down. By 2020, the market was undersupplied.
When mortgage rates fell to around 3% during the height of the pandemic and cash buyers drove up the market, inventory was at all-time low. But since interest rates began rising last year, lenders and brokers say buyers are more selective now and the market is less competitive. But now that mortgage rates hover around 7%, Glacier Bank lender Jill Jacobson says homeowners are hesitant to sell.
According to market data, 91% of mortgage holders in the U.S. have a mortgage rate of 5% or less when the current rate is roughly 7.5%.
“So we’ve got a stalemate. What we’re seeing in a permanent inventory perspective is that people are not willing to sell their house,” Jacobson said.
Persistent high housing prices and low inventory has kept residential mortgage lending down, Jacobson said, and with uncertainty surrounding interest rates, she predicts the market will remain stagnant in the next year until the end of 2024.
As residential inventory slowly comes online, Pistorese says the commercial market inventory has increased by about 35% since March. According to market data, commercial listings peaked in 2018 with 151. This August, there were 136 listings.
“Our all-time high was back in September 2018, and we are approaching that level now,” Pistorese said.
Drivers behind the commercial activity is lending and financing, Pistorese said, which differs from residential. Commercial properties typically require a larger down payment while interest rates can be significantly higher, too.
“I think it’s putting a squeeze on the profit margins and these investors are feeling it,” Pistorese said. “Some of them are looking at the risk versus reward and deciding maybe it’s time to list their property.”
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