Future of the Flathead: Diversified economy will help recovery

A surplus of housing and land combined with a downturn in the economy could mean a grim outlook for the Flathead Valley over the next several years.

That was the message at the seventh annual Economic Future of the Flathead event held Wednesday (Jan. 28) in Kalispell that was relayed by Jim Kelley of Kelley Appraisal and Gregg Davis, economist at Flathead Valley Community College.

The event was sponsored by Montana West Economic Development, a non-profit private/public partnership that works toward attracting and growing businesses in the valley.

Kelley said it’s more important to look at the volume of houses on the market locally and sales rather than focusing solely on prices.

Number of home sales dropped substantially in 2008, down nearly to 1998 levels, according to Kelley.

Added to that is an unsold housing inventory in Flathead County of roughly 21 months, nearly double the national level.

“The volume is back to 1998 levels. History has to decide when we get back. We bottomed out in 1997 and then to get back to the previous level it took three years,” said Kelley. “I don’t know how close we are to the bottom, but if history has anything to do with recovering that volume …”

On average homes in Kalispell spend just under a year on the market before selling. Columbia Falls is a bit less at about nine months.

Meanwhile, homes in Whitefish last year spent an average of nearly two years on the market before selling.

Land sales have also sunk to just 306 last year. A total of 1,957 pieces of property were listed last year — ranging from smaller than a half acre up to pieces more than 100 acres in size.

“It’s just fallen off a cliff since 2005,” said Kelley.

Land subdivision has outpaced housing starts for the last five of the last six years.

However, it’s not all bad news, according to Davis.

He said that Montana has some positive traits that will help it recover. Including a diversified economy, an educated labor force, beautiful scenery and a regional retail center.

Since 2004 median house price has been higher than affordability. Now that housing prices and mortgage rates are lower, those may become closer.

The median price peaked in 2006 and 2007 at just over $240,000, while affordability levels remained at about $180,000. In 2006 the median home price was 5.5 times higher than the median household income in the Flathead Valley.

Recovery here will also be dependent upon housing markets in the western region, including in Arizona and California.

“This area is so dependent on out-of-area buyers,” said Kelley. “Looking at that those areas gives us an idea of how soon they may be back to buy.”