Resort market insulated from U.S. housing trend

What does future hold for Whitefish?

By RICHARD HANNERS / Whitefish Pilot

A local real estate appraiser says Whitefish's home-sales market has so far been insulated from problems sweeping the nation because the area is "maturing" into a resort real estate market similar to Sun Valley, Idaho, and Jackson Hole, Wyo.

But what those changes hold for the future may interest residents concerned about preserving Whitefish's unique character.

John Woods has been a professional in the real estate industry for more than 25 years, working as an appraiser for the past 15. He's been in Whitefish since 1992.

Recently he prepared a sales activity report for Whitefish's residential real estate market since 2004. That market can be divided into three segments — single-family homes, condos and townhomes, and vacant land.

While 2005 and 2006 were big years for sales of condos and townhomes, average sales prices slightly decreased. Then sales dropped nearly 38 percent last year, he reports.

Vacant land sales also have sharply decreased — down nearly 30 percent from 2006 to 2007 and down by almost half since 2005. Prices for vacant land during that time steadily increased.

The story for single-family homes, however, is different. While there was a slight dip in sales in 2005, the number of homes sold in 2006 and 2007 was 8.57 percent higher than in 2005. There was no change from 2006 to 2007.

At the same time, average sales prices for most single-family homes have increased more than 14 percent since 2005. And most homes under $1 million sell within 7.7 to 15.3 months, Woods reports.

National trends

Meanwhile, the national real estate market has taken a significant dive. Woods says the national slowdown began in 2006 but got much worse last year — particularly with problems in the subprime market.

Woods said last year "was truly a year of negatives — both in actual numbers and in the news media's bombardment and focus on negative, affecting confidence level of consumers."

Whitefish, however, "has clearly not been following the 2006-2007 national downward trend," he said.

"Current inventory levels for the single-family residential market in Whitefish are typical for this time of year and typical of the market for the past three years," he said.

Woods has a big-picture explanation for why Whitefish is not following the national trend.

"Whitefish is a resort real estate market," he said. "Resort real estate markets are driven by different factors than typical primary- or investor-driven markets."

Buyers who come to resort areas are typically well-funded and financially capable of pursuing vacation homes or future retirement options, Woods said.

"Resort markets are quality-of-life driven," he said. "People move here for superior quality of life and safety compared to large metropolitan areas."

As a result, "Resort real estate markets are simply not as volatile as primary markets," he said.

While most Western resort markets are also destination ski areas, and skier numbers have declined nationally since the 1980s, Woods points to another factor that will drive the resort real estate market — baby boomers.

Woods points out that $1.5 trillion in assets will be transferred from the nation's senior generation to the baby-boomer generation over the

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next 15 years — much of it in the form of real estate.

He also notes that about 80 percent of surveyed Baby Boomers say they plan to continue working in their retirement, and that new technology makes it possible for them to work away from metropolitan areas.

The future by example

Woods, who lived in Ketchum, Idaho, in the late 1980s and witnessed its transformation into what he calls a "mature" resort community, said Whitefish is following a similar path.

In the early stages, key changes include infrastructure and community amenity developments, such as airport facilities, golf courses, hotels and expanded or improved ski resort facilities.

The next stage is when an area is "discovered" and downtowns get a major facelift. Woods said the Iron Horse project helped wealthy buyers "discover" Whitefish, and he says the city's Downtown Master Plan is typical of other maturing resort areas.

Woods' experience in Ketchum has parallels here in Whitefish. When he moved there in 1988, Ketchum was a small Western-style town and growing slowly. In 1989, Bank of America was granted a height variance for a new building. The Wrigley family of Chicago "discovered" Ketchum in 1990 and built the first 20,000-plus square-foot home.

Now, most of Ketchum's downtown has been changed by "block development," similar to the Block 46 project proposed in Whitefish, and most of the older Western-style buildings are gone. The population has doubled, and numerous large estate homes surround the city. Homes that sold for $300,000 to $800,000 in 1990 now sell for $2 million to $8 million.

Hailey, Idaho, about 15 miles away, became a bedroom community for the resort town's workforce. But small homes that sold in Hailey for $150,000 to $250,000 in 1990 now sell on average for $350,000. Some sell for $1 million.

Woods sees Whitefish maturing into a resort real estate community, and wonders how high residential real estate prices can go.

"Only about 13 percent of Whitefish home sales are over $1 million today," he said. "In the mature, competing markets, the total reverse is true — a small percentage is less than $1 million. So if Whitefish does mature as a resort real estate market, where will real estate prices be in 8-12 years?"