While midsummer temperatures in the Flathead are warming up, one thing is cooling: the housing market.
For the first time since before the pandemic, home and land sales are plummeting in the Flathead Valley, with numbers for the first and second quarters of 2022 dropping significantly from the same period in previous years. Meanwhile, Flathead residents continue to struggle with the confusing issues of limited housing supply and exorbitant prices.
Whitefish resident and independent real estate broker Patrick Nagle said he started to see the market drop significantly around May. Home sales and prices have fallen in the region, a phenomenon he attributes to a number of factors, including the anti-inflation policies implemented by the Federal Reserve.
“As interest rates rise, we are seeing buyer apprehension to engage in the market,” Nagle said.
In the first two quarters of 2022, Flathead County saw 845 residential home sales, down from 1,195 in the same period in 2021, 966 in 2020, and 889 in 2019. Land sales fell 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 drop in Flathead sales reflects overall national trends. In May, sales of existing homes in the United States were 8.6% lower than a year ago, falling to 5.41 million units. New home construction also stagnated, with national construction of single-family homes down 15.7% from a year ago. As inflation drives up the cost of building homes, many projects remain unfinished because developers cannot afford to complete them.
“We are still seeing strong demand for homes in need,” said Mark Kuhl, owner and supervising broker at Performance Real Estate in Kalispell. “We still have huge buyer demand and a lack of inventory.”
While the price cuts may look promising for those looking to find reasonable housing options, Kuhl says it’s simply a readjustment to costs that have been inflated sky-high during the pandemic. Although less expensive, houses in the valley remain largely unaffordable for many and are associated with high interest rates.
The sharp turn in northwest Montana’s housing market follows a pandemic-induced housing boom, during which many foreign residents moved to the area to work remotely and escape crowded cities. In 2020, Montana had a net gain of 6,661 state tax filers for a partial year, a significant portion of which moved into the state from California, Washington, Colorado and Oregon. Flathead County saw a 4.5% growth in those tax returns. The average income for newcomers during the months of the pandemic was about $110,000, higher than the average income for a resident of Montana.
Nagle said he has sold properties to a number of buyers in Seattle, Texas, the Bay Area and Southern California during the pandemic, many of whom he says have been looking for investment properties to build. “dream houses”.
He predicts that as supply continues to fall and prices remain inflated, wealthy real estate buyers will be able to navigate the tumultuous market much more easily than middle- and working-class residents of the valley.
“I think there will be a reckoning next year,” Nagle said. “Cash is going to be king. We’re definitely seeing people pull out of the market. They’re just not competing.
Nagle explained that while Whitefish’s status as a resort town “clings more easily to its value”, helping its real estate market to remain relatively warm despite the national downturn, the same is not true of the rest of The valley.
“The fallout is happening more in Kalispell than in Whitefish,” he said, adding that “it doesn’t look good” for those looking for affordable housing options.
Nagle expects home sales to continue falling in the fall as inflation and interest rates continue to weigh on Americans’ purchasing power.
“The valley is in the throes of big changes,” he said. “It’s going to be a lean year and people are re-examining their financial direction.”