Real-estate rebound ahead?

Montana Foreclosure News

September sales a hopeful sign amid downturned housing market

By LYNNETTE HINTZE/Daily Inter Lake

There's no doubt that selling real estate in the Flathead Valley has been a challenge this year, but Cal Scott sees a glimmer of hope in the September sales statistics compiled by the Northwest Montana Association of Realtors.

"It looks like we may be coming out of" the worst of the economic slowdown, said Scott, who just completed his term as president of the association. "This September is on par and in some areas better than September 2007."

People who study the local real-estate market, Scott said, "know that the big bounce of the pingpong ball is over." The bouncing will slow until the market settles back down, probably sometime by mid-2009, he speculated.

Bigfork and Kalispell are bright spots in the current real-estate spectrum, at least according to September figures.

In Bigfork, total sales for September this year were up, both in dollars and number of units sold. Residential real-estate sales totaled $12.3 million last month, up $6.7 million from last year's September sales of $5.5 million. Fifteen dwellings were sold last month in the Bigfork area, compared to eight last September.

Land sales were up by $732,000 for the month.

The Lakeside-Somers area also did well in September, up about $3.3 million in residential sales over last September.

While Realtors sold more homes in Kalispell during September - 51 dwellings compared to 42 dwellings sold in September 2007 - the value of the real estate sold dropped by nearly $1 million.

Statistics are merely a snapshot in time, Bigfork Realtor Bill Leininger cautioned, pointing to a $6 million home sold on Swan Lake that influenced Bigfork real-estate numbers. But that said, real estate is selling, he said.

"There are so many opportunities," he said. "There's a surplus of inventory and it's a great time to buy."

Scott, who has been through five significant market fluctuations during his long career in real estate, said he believes there's a "pent-up demand" for Flathead real estate, regardless of the economy.

"Next spring this pent-up demand will take off with a vengeance," Scott predicted. "We're poised, that if buyers haven't lost a great deal of their 401(k) and have a steady job, there are low interest rates and some phenomenal [financing] programs here."

Buyers often overlook assistance that's available from agencies such as Rural Development, the Montana Board of Housing, Glacier Affordable Housing, the Federal Housing Authority and Veterans Administration, he said.

ENCOURAGING September statistics by themselves can't ward off an economic slump that has dropped home valuations here by about 8 to 10 percent.

The average price of a home in Flathead County dropped from $358,569 during the first nine months of 2007 to $328,076 during the same period in 2008, according to statistics supplied by Kalispell appraiser Jim Kelley. The median price - the price of the house that falls in the middle of the total number of homes for sale in that area - fell from $250,000 to $240,000.

"From the standpoint of price, the Flathead has slid back a little, but it's slid back less than most of the U.S.," Scott said.

Housing starts have taken a hard hit, down 27 percent for the third quarter in the Flathead Valley, Flathead Building Association director Katie Chamberlain said. That's slightly higher than the 26 percent third-quarter decline for statewide housing starts.

Kelley's statistics show that residential home sales paralleled the drop in new housing starts, with a 26.6 percent drop in sales for the first nine months of 2008. Residential land sales are down 36.8 percent for the same three quarters.

Dustin Stewart, director of the Montana Building Industry Association, said he doesn't anticipate the housing construction market improving at least through the first half of 2009. But he has no doubt that the state's housing market will turn around.

Both Chamberlain and Stewart pointed to a long-term demand for homes that will increase over time. The governor's Housing Coordinating Team recently reported that Montana will need to add more than 95,000 homes to keep up with population growth between now and 2020, an average of more than 7,900 new homes per year. Last year roughly 5,800 homes were built statewide.

WHITEFISH and Columbia Falls real-estate sales for the month of September were much worse than other parts of the Flathead, but Scott said there are extenuating circumstances in both cities.

In Columbia Falls, where residential home sales were $8.2 million last September and just $1.8 million this September, much of the permitted land and lots have been built on, Scott said.

"Columbia Falls only has so much product and land," he said, citing geographical constraints of a mountain range and river. "The community has gone through burgeoning growth" and now doesn't have as many opportunities for home and land purchases.

Whitefish may have priced itself beyond the market, Scott said.

Whitefish residential sales were down nearly $7 million for September, with sales of $9.2 million last month compared to $16.2 million during September 2007. Sixteen homes were sold last month in Whitefish, compared to 24 sold last September.

Land sales were down from $4.6 million to $2 million for the same time period.

"Whitefish is a unique animal with a life of its own," he said. "It's a wants, rather than a needs market."

While the high-end nature of Whitefish real estate creates a smaller pool of prospective buyers, the city's policies also may be affecting sales, he said.

"The critical-areas ordinance [a new law governing construction in drainage-sensitive areas] has had a freezing effect on the market," Scott said. "It's raised so many questions, so those who want to make prudent choices are second-guessing Whitefish."

Scott speculated that high-end sales in Bigfork and Lakeside have "ramped up dramatically" in part because of city policies in Whitefish that are stifling buyers.

Longtime Whitefish Realtor Joe Basirico disputes that contention.

"I don't believe the critical-areas ordinance has affected the market," Basirico said. "Not one buyer I've had has mentioned that they weren't going to do business in Whitefish because of the ordinance. And I deal with a lot of high-end buyers."

Basirico believes market conditions in general have taken their toll in Whitefish just as they have elsewhere.

"There's no question it's been a tough year," he said.

There's a huge inventory of homes for sale right now, and some sellers haven't been willing to lower the price on their homes, he said.

"Sometimes sellers may need to accept that the profit they thought was there was only profit on paper," Basirico said.

Another factor affecting the inventory glut in the Flathead is the number of foreclosed homes coming on the market. While some of those are lower-end homes, there are also some defaults coming from higher-end second homes, Basirico said.

Flathead County leads the state right now in the number of foreclosures, Kelley said.

There currently are 225 homes here in some stage of foreclosure, close to double the number of foreclosures in the Flathead last December. Statewide, 946 homes are in foreclosure.

Because of the large inventory, homes tend to take longer to sell. The current average number of days on the market is 168.

RESIDENTIAL sales volume has been in a nosedive for the past year, Kelley's study shows. It peaked with close to 1,600 units sold in Flathead County in 2006, then "fell off a cliff," Kelley said.

"You have to go back to 1997 to find a lower volume number," he added.

Last year 1,357 homes were sold; for the first three quarters this year, 796 homes had sold. Using his statistical analysis, he projects the total number of homes sold this year will be around 1,000.

Bigfork Realtor Janae Moore said all the negative national news about the economy and foreclosures prompted many homebuyers to wait and see, but she encourages people to research local assistance programs.

"I think there's never been a better time to be buying," Moore said. "There are wonderful prices, historically low interest rates and favorable financing packages."

Sellers are getting creative, too. The developer of Big Hawk, a subdivision on former Plum Creek property, is offering an 18-month guarantee on pricing, Moore said.

She believes business is starting to pick up again.

"We don't necessarily follow the national trends," Moore said. "We have some great opportunities here."

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