High-end real estate market sees declines locally
By RICHARD HANNERS
Whitefish Pilot
The value of high-end real estate in the Flathead has decreased sharply in the past year, according to state and commercial appraisal figures.
There are several ways to establish real estate values, including what the owner thinks it’s worth, what the market thinks it’s worth, and what the state thinks it’s worth for tax purposes.
Montana property owners, particularly those in high-growth areas like Whitefish, have been concerned for some time about the impact of the state’s six-year property-tax reappraisal cycle. Some alarmists had predicted property taxes doubling in areas like Whitefish, but the collapse of the real estate market has dramatically changed how the reappraisal cycle will play out.
Randy Wilkie, administrator for the Montana Department of Revenue’s Property Assessment Division, addressed high-end real estate values when he spoke to the Montana Legislature’s Joint Senate-House Reappraisal Subcommittee on Jan. 27. He included information on local real estate values that was compiled by their staff in Flathead County, including regional manager Scott Williams.
According to Wilkie, property values in the Iron Horse subdivision have dropped since they peaked in 2002. Lots in the high-end development had increased in value by about 20-30 percent per year after the subdivision was created in 1998, reaching the $200,000 to $900,000 range by 2002, with some lots valued at more than $1 million because of views and size.
“The lot values for the current reappraisal will reflect those 2002 ranges in values,” Wilkie said, noting that some lots “have actually decreased to the $170,000 range.”
“This will not be the case for each and every lot, but it will be quite typical,” he said.
Properties along Whitefish Lake are typically valued according to lakefront footage. According to Wilkie’s figures, lakefront properties peaked in 2007 at $35,000 to $40,000 per lineal foot, with one or two properties hitting the $50,000 per lineal foot range.
“Prices have gone down since then,” Wilkie said. “We’ll be reflecting $18,000 to $19,000 per lineal foot of shore line as of the July 1, 2008, valuation date.”
Wilkie said that lower valuation compares well to the prior reappraisal cycle of Jan. 1, 2002, when lakeshore properties were valued at $3,500 to $4,000 per lineal foot.
“So while the increase will still be significant, around 375 percent, it’s representative of July 1, 2008, values and the current state of things,” he said.
Lots in downtown Whitefish have also seen a significant change. Wilkie said 7,000-square-foot lots in the “original Whitefish Townsite” were valued at $31,000 in the Jan. 1, 2002, reappraisal cycle.
“This area, driven by the high demand for all Whitefish property, will see values ranging from $110,000 to $125,000 per typical lot or their 2006 level,” he said. “Sales of these lots have become less frequent and have decreased in price over the past year to that 2006 level.”
While the state Revenue Department looks at every property for tax purposes, Jim Kelley, at Kelley Appraisal in Kalispell, uses data on new development from local governments and sales figures from Realtors to estimate trends.
According to Kelley’s 2008 Flathead County Housing Market study, sales of high-end home sales have slowed and inventory is piling up. On average, a home in Flathead County worth $500,000 to $1 million could stay on the market for 4.1 years before it sells. Homes worth between $1 million and $2 million could take seven years to sell, and homes worth more than $2 million could be on the market for 13.1 years.
One telling chart Kelley produced for his study is a history of high-value home sales from 1984 through 2008. No homes worth more than $500,000 were sold in the county until 1988, and no homes worth more than $1 million were sold in the county until 1991.
While both submarkets matured by the late 1990s, sales of these homes grew quickly starting in 2003. Sales in both submarkets peaked in 2006, with 262 homes worth more than $500,000 and 81 homes worth more than $1 million. The numbers in both submarkets have declined since then, with 118 homes worth more than $500,000 and 31 worth more than $1 million sold last year.
Two areas in the Flathead account for most high-end home sales — Whitefish and Flathead Lake. Both areas are not immune from current market troubles. A home in Iron Horse that sold for $2 million in 2001 sold last December for $1.6 million in a foreclosure auction, and a $2 million home on Flathead Lake brought $1.5 million in a foreclosure auction last fall.
Property owners in the Whitefish area who think they’re insulated from real estate woes elsewhere should also consider the results of a special study Kelley conducted for his 2007 housing market study. While out-of-state ownership across the Flathead was 12.4 percent, it was about 30 percent in the Whitefish area, he said.
Regional trends in places like California could impact local areas with a recreational real estate market, like Whitefish, Flathead Lake and Bigfork. Areas like Kalispell and Columbia Falls are in better shape, he said.