Comments on: Flathead Housing Sales Drop in First Half of 2008

By John on 09-05-08

“Some reality we have to face up to…“ that’s an understatement. The market in Flathead County is 30 percent over priced. This is based on historical trend-lines and inflation. If you buy today it must be at LEAST 30 percent below what the asking price is or else you will find yourself upside down on your property (or you will lose some of your equity). This is just the way it is. Real Estate agents lied us into this so don’t trust that they will give anyone any truth about the real market conditions.

By Daryl on 09-05-08

When you’re selling an acre for $100,000 that is insane for an area that has an annual median income of about $35,000.

I used to live there and plan on moving back, but I’m waiting 4 years & I’ll pay cash and will be going through a realty attorney.

By John on 09-05-08

Good move Daryl. I don’t think there has been enough accountability in the real estate industry for the crises they have helped cause. I sincerely believe that most people would be much better served doing their research—talking to locals—and spending a few hundred bucks on a real estate attorney than paying massive fees to some coifed up dim wit driving an Escalade around telling you that your property is going to double in value every 10 years. Where’s the accountability?

By Boo frigging Hoo on 09-06-08

Really, the “realtors” or at least the ones with the balls to remain here should realize that they created this mess along with their friends, the parasitic developers.  Thanks for the tax increase we told you would happen.

By JB on 09-07-08

John Is absolutely dead on - the real estate market here is leveraged to the hilt, and thanks to a tightening credit market,  prices will continue to fall until they reach true value equilibrium.  I don’t see it happening any sooner than 5 years, however - more than likely, it will be somewhat longer than that, despite the valley’s current economic strength.

By Drewster on 09-07-08

I think you’re probably right JB because it will take the real estate industry—and the developers five years of slowly dragging their feet to bring prices back to where the market is willing to buy. I understand there is a 8-9 year backlog on properties priced over 1.5 million dollars! That means people with high end properties should consider—on average—waiting up to 9 years to sell their property! Everybody should just get real—lower their prices to what the market expects and what the market can actually afford (without some fraud mortgage) and you’ll all be back in business. A lot of people will unfortunately find out they owe more than their property is worth—but let’s just pull the damn bandage of the wound instead of letting is fester for years of denial.

By JB on 09-07-08

Unfortunately Drewster, most real estste people are gluttons for punishment when it comes to market value…  I am SO glad I didn’t buy a house last year or the year before…now I will wait just like Daryl is, at least 5 years or more until prices are back to market or lower.

By A.R. on 09-08-08

I almost bought a house near echo lake last year. The real estate agent told me what a great deal it was- only 250,000 for a 2 bedroom with an unfinished basement. The house was over 25 years old and in such terrible shape, that it would take another hundred grand to fix it up! She told us anything that would get us to buy it! Luckily, I kept my senses- I would rather keep renting, than have to come home to an ugly house that was WAY OVERPRICED! Now I’m going back to school, will be moving next year to finish my degree, and when I’m done, will hopefully move back when housing prices level off. I cringe to think what would have happened if my wife and I listend to the real estate junkie, and bought into the lies!

By Generations on 09-08-08

This is a fundamental flaw in the way the country works these days. People don’t look to their homes as homes anymore they look at them as short term investments and have no intention of paying off the mortgage, but just flipping it when the prices go up. Bad way to think. It’s the same thing as people thinking of their 401k as a credit card and credit cards as income. Etc. etc. The US is in real economic trouble and the sheer denial in the average citizen is reaching really scary levels.

By James on 09-09-08

The valley’s real estate market will never recover to previous levels. With the lack of interest in rural properties due to increases in gas prices, the old dream of owning property in Montana and driving a big SUV are pretty much over. This along with the fact that 80% of the jobs in this valley are linked with housing and development is going to cause a mass exodus of disillusioned Montana home owners who thought they had bought into the American dream. This will cause a huge strain on the local governments and health care industries causing further collapse of the local economy and again further movement of population away from the valley. This is not some doomsday scenario, this is happening now.

By Kasey on 09-10-08

James, is it really true that 80% of the jobs in the valley are linked to housing and development?  Wow. 

And what % of the homes are second homes, owned by out of staters who will have a harder time paying for plane fares, etc?

By James on 09-10-08

Kasey, I’m not sure what the exact % is but I can tell you it’s very high. I know of many secondary home owners from the California and Arizona areas that now pay almost six hundred dollars per person for the commute. This is the problem facing our valley, as isolated as we are it makes it almost impossible to commute to any cities other than Missoula to find work without spending an arm and a leg in the process. I think many thought that they would just rent out their house in the meantime but that market is pretty much saturated. I feel bad for them because many have put their live savings into these homes thinking that they would get a better return than in 401ks and had realtors telling them that realestate has always gone up here making it a safe investment. Now many of these people are slowly going broke because they bought into this scam.

By Henry on 09-10-08

I recently had a real estate agent give me the old line “Property tends to double in value every ten years.“ This is patently a lie (unless you only use a sampling of the last 10 years). Studies showing property valuation trends going back 100 years (and some in Europe going back 300 years) show that real estate pretty much doesn’t lose value over time, but gains value only in-line with inflation. What that means is that real estate itself (and averaged out across all places) does not inherently gain value. That makes sense because real estate in itself just sits there. Of course, there are variables that can help real estate in localized conditions. These are sometimes external influences because of community investments such as improved infrastructure and amenities in the community that can make a property more valuable. The rule still applies though: Real estate does not gain value inherently over the long term. You have to add value to it by fixing it up yourself or if the local community improves the neighborhood.

By James on 09-11-08

Henry, Great point. The local economy has had a great run the last 10 years because of the housing market… but it’s all about to come to a screeching halt. I have a feeling that we are going to look like any other boom to bust town of the past with high unemployment and people (especially the young) moving elsewhere to find work esentially causing Kalispell to look like a modern day ghost town. The problem is we have no family sustaining jobs here and a company would be crazy with our remoteness and the recent surge in the cost of fuel, to move their company to this valley. We are in big trouble but no one wants to talk about it. It’s like the big, hungry thousand pound bear in the room that everybody thinks if they ignore, will go away. This is not going away! Our city and state leaders need to aknowlege the problem and find solutions rather than bury their heads in the sand and hope for the best.

By Kasey on 09-12-08

You are so right, James.  In the 1990s, it looked like telecommuting and easy and cheap long distance travel were going to make it possible for people to live where ever they wanted.  But high oil prices make this seem like a pipe dream.  That is really a problem for remote locations like the Flathead, Missoula, Boise…  And it’s a problem that will outlast the credit crunch.

Today on the Missoulian’s business page was a national map showing how much various housing markets are overvalued.  Missoula is on there in the “moderately overvalued—15-35%.“ category.  You can go to the Global Insight home page to read the full report.  You have to have it emailed to you, but it’s free.  http://www.globalinsight.com/Highlight/HighlightDetail2350.htm


Here’s the detail for Missoula, which apparently means the whole metropolitan/county area given the boundaries shown on the map:

2004 median house price $189K, 13% overvalued
2005 median price $207K, 17% overvalued
2006 median price $227K, 22.% overvalued
2007 median price $243K, 25% overvalued
2008 median price $241K, 20% overvalued

This suggests the “right” price to pay for a house would be the 2003 value, don’t you think?  So it’s handy that MT’s last real estate appraisals were done in 2003.  Of course these are usually lower than the market value of the home, but it wouldn’t be hard to adjust a bit for that.  (Does anyone know how the market and tax appraisal values are related?)

Another part of the report ranks metropolitan areas by overvaluation.  Missoula is #26 in the nation.  So much for the realtor mantra of “we will not suffer as much as other areas.“ 

Many of the areas that are more overvalued that Missoula are also “commuter paradises” in the West, like:

Bend, OR—overvalued 47%
St. George, UT—overvalued 36%
Boise, ID—overvalued 25%
Spokane, WA—overvalued 24%
Grand Junction, CO—overvalued 23%

Since Global Insight correctly predicted the first markets to crash, it is probably going to be right about these as well.

These valuations are based on OFHEO data plus interest rates, household incomes, etc.

—Kasey

By Kasey on 09-12-08

I should explain why 2003 prices would be about right for now.

According to the data above, 2004 prices in Missoula were 14% too high.

According to Paul Polzin (using OFHEO data), from 2003-2004, Missoula house prices rose 8.2%.  http://www.mtinbusiness.com/current/bus01.php

So 2003 prices are a good indicator of where we should be.

Now, if only MT was a disclosure state, so we could find out what 2003 prices on particular houses actually were!  I hope that is one of the fall-outs of the housing crash.  It’s time for the people of MT to know what’s really going on with prices in their neighborhoods.

By James on 09-12-08

Kasey, Thanks for the information. My guess is that the home values (or overvalue as the case may be) is more inline with towns like Bend and St. George than Missoula. I know that part how they come up with these figures envolves comparing the mean household income to the mean price of area homes. Missoula at least has some industry ( two hospitals and the university) that are not directly dependent on the housing market. With the lay-offs that have occurred here this year and more to come, our mean household income is shrinking by the day. It seems the only people who can afford to live here are the out of town retirement age group who have been snookered into buying a home here because the realtor’s have convinced them during the summer, that this is a great place to retire. What a mean, dirty trick! I have friends who are a older retired couple from California who fell for this…literally. The husband two years ago fell on the ice and broke both hips and now has difficulty getting around. In the winter they are both essentially shut- ins and now can’t afford to sell their house to move back to family back in California. I think the realtor who conned this couple into buying this “great retirement home” should be sent to jail.

By illustr8r on 09-12-08

I guess we may be one of the ones that got roped into and taken advantage of during the boom. We bought land in Lakeside in 2005 after looking for property in E. WA (all the good land with views was long bought and taken by Microsofties wink) So, we kept going E. and fell for the Flathead Valley. We went to refinance and our property has dropped in value 20% (this was in Feb.) and we waited to refinance hoping the “summer season” might improve comparables. Looks like they haven’t. We have the land/view we wanted but a sad sick feeling to go along with it. We have even talked about moving over to MT but this blog makes me hesitate to consider it now (we are self employed but not richy rich types people vent about here sometimes). Meanwhile, I’ll remain hopeful that the market improves eventually and we at least get back what we have lost in value…*sigh*

By Citizen Kane on 09-12-08

I thought this would be appropriate in this commentary as well.  I wrote this one for the city budget, however the two seem to be related.

A long long time ago, in a town far far away….....

There existed a town called Kalispell.  The towns wealth disapeared in merely 2 years time, under the rule of a maniacal and under qualified management.  As unemployment mounted and buildings became abandoned, city services slowly ceased to exist.  Fire engines stopped responding to calls for aide, because there was no one there to drive them.  Homes burned, people who were sick or injured died from what was once considered routine illnesses.  The police forces were spread thin, and unable to cope with the increase in crime, caused by the economic hardships.  Robberies, assaults, vandalism and burglary increased daily as criminals learned the limitations of the local law enforcement.  The parks were covered with weeds and unkept trees. The roads rivaled those of bombed out Beirut.  Vagabonds and transients began to occupy and squat in what were once bustling downtown business spaces.  Tent cities filled with homeless, foreclosed on middle class workers began popping up in outlying areas.  Soon, all but drug addicts and criminals occupied this once thriving community.  Those who could afford to saw the writing on the wall and left while they still could.  Those who knew, sold their homes and moved their life and business to more responsible towns.  Some even left the state itself.  With the agriculture of the area all but destroyed by sprawl, and no real industry to speak of, the town died.  Only those that suck from the system stayed behind.  THe area became a pox on the region.  Producing nothing, giving nothing, it only asked of others and became a town of indigent and dirty people.  Those who had moved only have sad memories of the town they left behind.  Sad memories and regret.  Regret for not seeing what was happening and doing something about it.  Regret for not getting involved in the process and venues allowed in our democratic way.  Stripped of its worth and resources, Kalispell turned to dust and blew down the street of history as a tumble weed.  Who would have thought.

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