Demand in the Flathead’s high-end real estate market is drying up, most noticeably along the banks of Flathead Lake where there were no residential sales in the first six months of this year.
In his mid-year update on market trends, Kalispell-based real estate appraiser Jim Kelley reported that sales of lakefront homes and condominiums had come to a screeching halt.
It’s the first time in the 26 years Kelley has sifted through countywide numbers, compiling statistics in a database, that there has been a six-month period without sales in that market. “It’s unheard of,” he said.
Back in 2006, when the housing boom was still robust, there were 46 sales of residential lakefront units, according to Kelley’s numbers. Volume was up 53 percent that year and the median price climbed 24 percent, up to $620,000. The sales slowed down in 2007, dropping to 27, but again the median price grew – this time to $885,000.
A year later, however, the lakefront market started showing real signs of a significant slowdown: Housing sales slipped to just 18 in 2008, and the median price took a dip, too, shrinking 15 percent to $749,000.
Now, everything’s stalled.
To be sure, real estate along Flathead Lake, where space is at a premium and extravagant vacation homes are popular, isn’t the valley-wide norm. “There isn’t one single real estate market,” Kelley said.
Sales volume and prices have remained stronger for cheaper homes – those priced under $200,000 – in more affordable places like Kalispell and Columbia Falls. But the higher-end market, which has relied largely on out-of-state buyers, has seen its shoppers diminish.
“Largely, the Flathead Lake market has been driven by out-of-area money coming in and seeing this as a hot spot to buy recreation properties and as a good deal compared to other resort areas,” Kelley said.
“With the current economic situation, there aren’t a lot of people looking for second homes right now,” he added, saying that as housing prices fall in more developed resort areas it increases competition for the buyers still looking.
With diminishing demand, it would follow that prices have been plummeting. But since appraisals are re-evaluated at the time of sale, with nothing selling, it’s hard to know exactly how far prices have fallen.
In his report, Kelley said there are several properties on the market for 10 to 20 percent less than their 2005 and 2006 purchase prices. In some cases there have been price reductions in excess of 60 percent from the original listing price.
Polson appraiser Tim McGinnus cautioned against reading too much into listing prices. “Where we see the rubber meet the road is in actual sales figures,” he said, adding that people can list homes for “whatever they want.”
Kelley’s data is correct based on what’s available, McGinnus said, but might be missing sales that occur between homeowners and aren’t tracked on MLS, the real estate database. Montana is a non-disclosure state, so these people don’t have to report their sale prices.
“There are rumors out there that there have been some sales on the lake, but they’ve been private and we aren’t privy to that information,” he said.
McGinnus pointed out that there had also been one land sale – a one-acre property on East Bay for $494,000 – in June. Despite the lagging sales, McGinnus remains bullish when it comes to lakefront.
“You can’t make anymore waterfront,” he said. “There’s some intrinsic value there that will hold.”