|Flathead Valley Real Estate Continues to Post Modest Gains
Upward trends for sales and prices continue.
The winter of 2013-2014 started off in December with more snow than then entire previous winter, but milder temperatures have settled in for mid-January. Outdoor enthusiasts looking to snow shoe, Nordic ski, or go ice fishing are loving the sunshine. Downhill skiers are all hoping for a few new inches of fresh powder.
Annual sales numbers for Flathead valley real estate in the northwest Montana were up once again with a 16% increase in residential transactions and 23% in volume. These increases are at a higher rate than we saw in the 2012 recovery year. Median prices have also continued to increase by double digits in all sectors with the exception of raw land. The primary driver for increased prices is the significant reduction of distressed sales in our market (see “Impact of Distressed” below). We are at a multi-year low of only 17% distressed sales for the year. Reducing these discounted sales has the direct affect of increasing prices.
Secondary drivers include a reduced inventory, strong financial markets, and a sustained real estate recovery in “feeder markets” elsewhere in the country. It is yet to be seen if the decreasing affordability increase driven by higher interest rates and home prices will have a significant affect in our market.
Total Residential Sales from NMAR MLS
Sales by Segment
The land and commercial Flathead Valley real estate segments also showed strong sales increases in volume, but land prices are still low due to the large inventory of developed lots in the market.
As you can see in the graph below, 2013 was up over the past two years.
Luxury Market Trends
The Flathead Valley real estate luxury market also posted solid gains compared to the past several years. For this report, luxury sales represent those residential transactions reported in NMAR MLS with a sale price at or above one million dollars ($1M US). The number of luxury transactions surpassed all years going back to 2007. While the current trend is moving in the positive direction, 2013 sales were just slightly greater than half of the sales posted in the peak year of 2006 for this segment.
Impact of Distressed Properties on Local Market
Distressed sales continue to play a role in our local Flathead Valley real estate market, but not nearly as significant as in the past 2 years. Annual sales of distressed homes dropped by 16 points between 2012 and 2013.
Another good sign in the distressed sales segment is the market’s relatively low inventory of bank-owned properties. Based on our current absorption rate, there is less than a one month inventory of bank-owned residential listings currently on the market compared to a healthy 6 month inventory for the overall residential market.
Based on low inventory of distressed property, I expect to see continued upward pressure on pricing in the coming year.
The Flathead valley real estate land market built on gains from the two previous years and jumped to just over $100M in sales. However this number is still a relatively muted recovery compared with peak years of $198M in 2007 and $305M in 2006.
Prices have begun to stabilize slightly at a significantly reduced level. The market still holds a deep inventory of lots and land. As prices of homes continue to recover along with a decreasing supply, I expect to see land sales and prices to increase.