Home prices nearing pre-recession levels

An unprecedented number of residential properties sold in 2017, according to a new report by Jim Kelley of Kelley Appraisal in Kalispell and data from the Kalispell Building Department.

The residential boom of 1,882 home sales occurred alongside a slight increase in sales of commercial space, which Kelley said likely is fueled by improving unemployment figures and an improving labor force participation rate in the area and other positive economic indicators. The number of foreclosures continued a years-long decrease in 2017 and the number of land sales was up, too.

Many of the figures represented in the report clearly show huge changes to the market over the last 20 years. Nearly every category shows steady, undeniable gains since the end of the Great Recession, and many categories show that Flathead County numbers have neared and even equaled the numbers from the year the bubble popped.

Numbers of sales are up and even historically high average prices driven by the housing bubble were nearly matched by the 2017 figures in Flathead County. Median home prices also saw a historical peak in 2017, according to Kelley’s report.

Kelley said while the numbers are indicators of a strong economy overall, it is worth being cautious about heading straight into another bubble. He said one of the key differences is that banking behavior and legislation is different now than it was then.

“I think that’s the million-dollar question,” Kelley told the Daily Inter Lake.

“The only difference is back then the banks were a whole lot looser with money, people were getting zero interest down or interest only payments for first five years, and they were anticipating it was going to appreciate. Those kinds of financing options are no longer available.”

He suspects that next year will see another increase in most of those major categories, though the rate of increase will slow. He agrees with area Realtors’ diagnosis that while 2017 saw a large number of low-end properties sell, there simply isn’t enough stock available for the same thing to happen this year. Kelley said prices are eclipsing the levels many folks consider affordable and that, combined with tighter lending from banks, may depress sales.

One chart in Kelley’s report highlights the troubling trend well. He contrasts affordability and median price, showing that since 1984 they were nearly identical until about 2003 when median price began to rapidly outpace affordability.

That trend crashed to the detriment of many Flathead County residents and millions of Americans as similar things happened nationwide. It led to several years of a return to levels that were essentially normal. In 2014, median price again crept above the affordability line, and they have only grown farther apart since. The difference isn’t as vast as the highest point in the bubble, but if it keeps going at current rates it would be there in about two years.

Last year in the city of Kalispell 44 new lots were created, compared to 39 in 2016 and 34 in 2015. In 2010, the report says zero new lots were created in the city, while the year before the figure was 240. The 20-year high was 582 new lots in 2006.

The numbers are starkly different, however, than the numbers for new residential construction. Nearly 200 new residential buildings were built in Kalispell in 2017, slightly higher than in 2008 and almost double the number in 2009, both years where lots created outpaced new residential buildings.

Whitefish has seen a more rapid pickup, and a closer return to pre-recession levels. Last year, 105 new lots were created, representing more than a 300 percent increase from 2016’s 30 new lots. In 2007, only 99 new lots were created in Whitefish.

One portion of the market that never has significantly recovered is rural housing. Flathead County reported 315 lots were created in 2016, essentially equal to the 318 lots created in 2016 and the fluctuations in the past several years. The pre-recession high was 1,327 lots created outside of all city limits in 2005, and the numbers didn’t dip below 1,000 until 2009, when it was nearly 700 before plummeting to just over 100 in 2010.

Kelley’s report also examines the number of sales, median price and average price for all properties in the county under 2 acres and without waterfront access, a large category he predicts is more typically bought and sold by full-time Flathead County residents.

The trends in that data mirror that of the wider market, showing historically high numbers of sales and average and median prices higher even than those during the recession.

Reporter Peregrine Frissell can be reached at (406) 758-4438 or pfrissell@dailyinterlake.com.