Realtors ‘Cautiously Optimistic’ as Rising Mortgage Rates and Inventory Impact Flathead Valley’s Housing Market
While strong residential development has contributed to market fluidity, rising interest rates, changing state policies and economic uncertainty will likely impact the housing market as the busy summer season heats up
By Maggie Dresser
Despite relatively flat year-over-year sales and another spike in mortgage rates, realtors in northwest Montana are anticipating a busy summer as the real estate market shifts out of the slow winter months.
“My realtors – at the moment – are cautiously optimistic for a good summer,” Northwest Montana Association of REALTORS Public Affairs Director Erica Wirtala said. “There seems to be a little bit more inventory and more movement.”
The Flathead Valley housing market has been slowly thawing since it froze in 2022, when mortgage rates rose above 7% following the pandemic-era housing frenzy. Now, with rates declining from their peak and new builds coming online, Wirtala predicts summer home prices will rise while days on the market will drop.
In February, Kalispell’s median sales price rose to $552,500 from $505,000 in January, down slightly from the median sale price of $557,500 in February 2025, according to Montana Regional MLS data.
Last month, Kalispell’s average days on market rose from 96 days in January to 138 days in February, up slightly from 128 days during the same month in 2025.
Whitefish’s median sales price in January 2026 dropped to $673,000 – its lowest level in years – but shot back up to $1.3 million the next month.
Mortgage rates at the end of last month dropped below 6% for the first time since 2022, but that number has since shot back up to 6.5% since the start of the war in Iran. And economists say the drop in February was too brief to make much of an impact on the market.
“It was a very brief dip in mortgage rates,” Jeff Michael, the executive director of the University of Montana’s Bureau of Business and Economic Research (BBER), said in an email. “In my view, the only thing that would cause a significant drop in mortgage rates would be a recession – a recession would reduce housing demand and lower rates would only partially offset that.”
Michael clarified that while he does not forecast a recession, the risk has increased as the war shocks energy markets and increases uncertainty.
While PureWest broker Wendy Brown says the rate drop didn’t affect the market overall, she did have buyer and seller who were in the process of negotiating a deal and in that timeframe.When rates began rising, the buyer could no longer qualify for the loan payment.
“When you’re talking about entry-level housing, that $200 or $300 a month can make a big impact on what you can afford,” Brown said. “Overall, people are figuring out the interest rates, and they are not causing a real stall in the market.”
In Flathead County, February’s year-over-year closed sales dropped from 97 in 2025 to 87 this year, but Brown said her office saw a 610% year-over-year increase in sales volume during that timeframe, which she attributes to some “really big sales.”
Brown says the grown inventory, too, is helping boost some sales as projects wrap up, with the greatest demand in the entry-level market ranging from $400,000 to $500,000, while homes in the $1 million to $2 million budget are also in high demand.
Last year in Kalispell, building permits were issued for 114 single-family units and townhomes and 406 multi-family units, totaling 520 permits, according to the 2025 Construction, Subdivision and Annexation report compiled by city officials.
So far this year, permits for 50 single-family homes were issued, according to Assistant Director of Development Services PJ Sorensen.
Last year, final plats were issued for 112 acres in lots for new subdivision lots, which includes the Bloomstone development, a project bringing in hundreds of single- and multi-family units that broke ground a decade ago. Now in its fifth and sixth phases, the subdivision was initially introduced in 2008 before the Great Recession destabilized the housing market.
As new builds come online, new housing construction has shifted from single-family homes to multi-family homes, according to the report, with an increased demand for townhouses, duplexes and apartments as affordability remains out of reach for buyers.
Sorensen said the Montana Land Use Planning Act (MLUPA), a state mandate that will require Kalispell, Whitefish and Columbia Falls to adopt a new land use plan this May, will significantly impact developers’ projects in the future.
The land use plan is intended to replace existing growth policies and update local zoning and subdivision regulations in accordance with MLUPA, which includes things like removing some public participation requirements and adjusting zoning ordinances.
Other factors like high interest rates and a tight construction labor market will also impact how developments will take shape, Sorensen said.
“It certainly opens some options from developers on a large and small scale,” Sorensen said, referring to MLUPA. “How that plays out will be interesting – so much comes out with land use and regulations, interest, labor markets and supplies – all those come into play with what gets built out here. It’s certainly a challenge in how things are traditionally done.”