The 2014 Flathead County Real Estate Market - …kelleyappraisal.net/FlatheadMarket14.pdf · The...

The Flathead Market was mostly stable in 2014 withcontinued signs of improvement

The 2014 Flathead County Real Estate Market

By Jim KelleyKelley Appraisal

1001 South Main StreetKalispell, MT(406)755-2015

http://kelleyappraisal.net/[email protected]

http://kelleyappraisal.net/

mailto:[email protected]

TABLE OF CONTENTS

INTRODUCTION Summary: Page 2About Jim Kelley: Page 3

EMPLOYMENT Page 4SUBDIVISION ACTIVITY Page 5NEW CONSTRUCTION Page 6LOT CREATION VS NEW CONSTRUCTION Page 9

City of Kalispell: Page 9Flathead County: Page 10Columbia Falls: Page 10

RESIDENTIAL SALES Page 11Overall Residential Foreclosures: Page 12Residential Sales (No Waterfront and Less than Two Acres): Page 14Foreclosures (No Waterfront and Less than Two Acres): Page 15Residential Sales Volume: Page 16Price Distribution of the Residential Market: Page 17

RESIDENTIAL SUB-MARKETS Page 19Kalispell(City Limits): Page 19Kalispell Area(Within 3.5 Miles of the City Limits): Page 20Whitefish (City Limits): Page 21Whitefish Area(Within 3.5 Miles of the City Limits): Page 22Columbia Falls(City Limits): Page 23Columbia Falls Area(Within 3.5 Miles of the City Limits): Page 24Bigfork Area(Within Five Miles of Electric Avenue): Page 25Lakeside Area(Within Five miles of downtown Lakeside): Page 26Flathead Lake Lakefront Homes: Page 27Whitefish Lake Lakefront Homes: Page 29

LAND MARKET Page 31HOUSING AFFORDABILITY Page 33FORECLOSURES Page 34COMMERCIAL REAL ESTATE MARKET Page 35

Yearly Commercial Sales: Page 36Percentage of New Commercial Listings that Sold: Page 36Commercial New Construction in 2014: Page 37

Page 1 of 37 - Kelley Appraisal

INTRODUCTION

Summary:This report addresses statistical details of the Flathead County Real Estate market over the last fewyears and summaries on the 2014 market.

In general, 2014 was mostly stable with numbers similar to 2013. The following is a list of somekey points:

1. The employment picture continues to improve.2. Subdivision activity continues near its all-time low, but as the inventory of bank-owned has

mostly gone away. There is some new interest in development, but mostly within the Citylimits. There continues to be little interest in rural subdivision development.

3. New home construction continues at a relatively low rate, but did show a slight improvementin 2014.

4. The number of residential home sales was down 2.1% from 2013 and the inventory of homeshas mostly stabilized.

5. REO sales continued to decline in 2014 to a point that they no longer play a material roll inthe local market.

6. Of the County’s sub-markets, the Kalispell had the largest increase in the number of sales,while Whitefish, Bigfork and Lakeside showed a decrease in the number of sales. Thedecrease in the number of sales in those three areas is most likely due to some relatively steepprice increase in their median and average home price.

7. The other sub-markets were mixed with both positive and negative signals.8. The number of land sales were very similar to 2013, but were still far lower than what they

were prior to 2007. 9. Housing continues to be affordable, but as interest rates start to increase, the affordability

level tends to decrease.10. The number of foreclosures continued to decrease through 2014.11. Commercial property sales increased in 2014 and the number of commercial REO sales

decreased. Commercial vacancies decreased through 2014.


About Jim Kelley:

Jim is the owner of Kelley Appraisal and is a 1975 graduate of the University of Montana BusinessSchool. He has been a leading provider of appraisals for commercial, residential and investmentreal estate in northwestern Montana for the last 36 years. With extensive professional experience andeducation in Finance, Mr. Kelley specializes in appraisals for purchases, sales, commercial loans,residential loans, and litigation. Mr. Kelley has built the most extensive statistical data base for theeconomic and real estate in northwestern Montana and been a guest speaker in the finance industryon numerous occasions. He was an invited lecturer to college students in China in 2007 on how thereal estate and the appraisal business works in the United States. Mr. Kelley's active roles in theFlathead Valley community in the past 36 years extend also into sailboat racing on the Flathead Lakeand skiing on the Big Mountain.

Kelley Appraisal has extensive experience, education and qualifications in the following:

• All Classes of Commercial Property Appraisals• All Classes of Industrial Property Appraisals• Commercial and residential real estate loans• Subdivision analysis, valuation and market studies• Condominium project analysis, valuation and market studies• Complex real estate problems• Appraisals using the Uniform Appraisal Standards for Federal Land Acquisitions aka

“Yellow Book”• Real estate portfolios• Proposed properties and construction loans• Legal and tax matters• Litigation support and court testimony• Partial interests of property rights• Estate settlements• Estate planning• High-end residential properties• Rural land and large acreage appraisals• Recreational and waterfront properties• Historical values and related value trends• Forensic real estate valuation• Market studies and analysis

For information on pricing for any of the services offered by Kelley Appraisal, [email protected]


mailto:[email protected]

EMPLOYMENT

Throughout most of 2014 the unemployment rate continued to decrease with a low in September of4.8%. A key number that I look at is the actual number of people that are employed. In 2014 theaverage number of people employed was 41,997, which is up from 40,182 in 2013, 39,763 in 2012and 38,750 in 2011. Even with that increase, it is still 2,096 short of the 44,093 that were employedin 2007.


Lots Created in Kalispell

Flathead County

SUBDIVISION ACTIVITY

In the City of Kalispell,there were 36 new lotscreated, compared to 10 in2013.

Flathead County reportedthat there were 140 platedlots and 137 lots created bya certificate of survey. Thetotal number of lots createdin the County in 2014 was277, which is up from 186in 2013.


NEW CONSTRUCTION

In Kalispell, there were 81 Single Family Residences, three duplexes, 14 townhouses and nomultifamily units for a total of 98 units. The following graph of Kalispell's activity is from the2014 Kalispell Building Department report.

Whitefish reported 72 SFRs, six duplexes or townhouses and 15 multifamily units.

Columbia Falls reported eight SFRs, no duplexes, six townhouses and two multifamily units.


Flathead County:Because Flathead County does not issue building permits, the next best estimate comes from thenumber of septic permits. In 2014, there were 346 final septic inspections, 369 written permitsand 441 applications.

The 346 septic inspections are a reasonable estimate of the number of completed properties in theCounty. They include both residential and commercial. These figures can be somewhat misleading,because if there is a community sewer system, several new homes could be under one septicinspection.


City and County Construction Summary:

The following graph shows a ten-year history of the totals from each city with the line graphshowing the overall totals.


LOT CREATION VS NEW CONSTRUCTION

The following graphs illustrate the historic relationship between new lot creation and newconstruction.

City of Kalispell:Kalispell had 36 newlots created and 98building permits.There are currentlypreliminary plats onfile for new 1,063 lotsin Kalispell. In thelast five years,preliminary plats on478 lots have alreadyexpired.

Supplied by theKalispell BuildingDepartment.

City of Whitefish:Whitefish had 93building permits and44 new lots created. At this time, there arepreliminary plats for86 lots which willlikely be completed in2015.

Supplied by theWhitefish BuildingDepartment.


Flathead County:The graph to the right shows the relationship between lot creation and final septic inspections inFlathead County. Up until 2010, lot creation out paced new construction. In the last five years, thenumber of lots created has been approximately the same as the number of new construction with newconstruction outpacing lot creation in 2013 and 2014.

Since 1991, the totalnumber of lotscreated was 18,170and the total numberof f ina l sep t icinspections totaled13,144. The netdifference over thelast 23 years is thatthere have been 5,026more lots created thanthere have beenconstruction projectson them.

Columbia Falls:No new lots were reported in 2014, but there are four preliminary plats on file for a total of 80 lots.


RESIDENTIAL SALESThe following is a 31-year history of home sales in Flathead County. The key data points are thenumber of sales and the median price. The market appears to have found its bottom from the recentrecession in 2011. In 2013 prices started to increase and that continued through 2014. A primaryfactor in the increased over the last two years, is the bank-owned and sorts sales are no longer aprimary factor in the market.


Overall Residential Foreclosures:Of the 1,507 Flathead County residential sales in 2014, only 7.9% were bank-owned properties and1.9% were short sales. Both the percentage and total number of bank-owned sales were down fromprevious years.

The following graph shows a month over month history of REO listings. It is noted that the numberof REO listings is decreasing.


The number of residential REO sales continued to decrease through 2014. The combination of adecrease in REO listings and subsequent decrease in REO sales continues to indicate that we aremostly out of the local foreclosure problem.


Residential Sales (No Waterfront and Less than Two Acres):The following table addresses just residential properties which do not have water frontage and areon less than two acres. This is the type of residential properties that are more typically bought andsold by full-time Flathead County residents.


Foreclosures (No Waterfront and Less than Two Acres):

On this class of residential property, only 7.1% were bank-owned properties and 1.7% were shortsales. This continues to indicate that distressed properties are no longer a material factor in theFlathead home market.


Residential Sales Volume:This following graph illustrates a history of residential sales as they relate to the number of newlistings that came on the market. This graph shows a slight decrease from 61.8% in 2013 to 55.4%in 2014. This figure is generally similar to what it from 2003 through 2006.


Price Distribution of the Residential Market:This following table shows the distribution of the listings and sales in each price range and the totalmonths inventory in each price range.

According to the National Association of Realtors research department, the national averageinventory as of December 2014, was 4.4 months. In Flathead County, the average inventory forproperties under $300,000 was 5.0 months, but the overall average is 8.8 months.


This next table show the distribution of residential listings and sales by lot size and shows that thelargest percentage of the demand is for homes on small lots that are typically in an urban location.


RESIDENTIAL SUB-MARKETS

Kalispell(City Limits):

This data represents sales and listings that are only within the City limits of Kalispell.

The Kalispell City limits sales represent 29.3% of the overall residential market, 26% of the REOsales and 44.8% of the short sales.


Kalispell Area(Within 3.5 Miles of the City Limits):

The total number of sales within 3.5 miles of the Kalispell City limits represents 47.4% of the totalnumber of residential properties sold, 50% of the REO sales and 58.6% of the short sales.


Whitefish (City Limits):

This data represents sales and listings that are only within the City limits of Whitefish.

The Whitefish City limits sales represent 12.1% of the overall residential market, 5% of the REOsales and 3.4% of the short sales.


Whitefish Area(Within 3.5 Miles of the City Limits):

These sales represent 18.5% of the overall residential market, 10% of the REO sales and 13.8% ofthe short sales.


Columbia Falls(City Limits):

These sales represent 4.4% of the overall residential market, 7.4% of the REO sales and 3.5% of theshort sales


Columbia Falls Area(Within 3.5 Miles of the City Limits):

These sales represent 10.6% of the overall residential market, 13.2% of the REO sales and 10.5%of the short sales.


Bigfork Area(Within Five Miles of Electric Avenue):

These sales represent 7.4% of the Flathead County residential sales, 2.5% of the REO sales and 3.5%of the short sales.


Lakeside Area(Within Five miles of downtown Lakeside):

The Lakeside market accounts for 3.5% of the overall residential sales, 3.3% of the REO sales and3.5% of the short sales.


Flathead Lake Lakefront Homes:The first table addresses all residential lakefront homes, which includes condominium andtownhouses.


The second table addresses residential lakefront homes, excluding condominium and townhouses.


Whitefish Lake Lakefront Homes:The first table addresses all residential lakefront homes, which includes condominium andtownhouses.


The second table addresses residential lakefront homes, excluding condominium and townhouses.


LAND MARKET

Residential land sales decreased from the 527 that occurred in 2013.

The next graph shows all land sales, including commercial and waterfront:


This next graph shows the number of land sales that occurred over the last few years on a monthlybasis:

In 2014, 37.7% of the new land listing resulted in a sale.


HOUSING AFFORDABILITYThis next graph illustrates the current and historic relationship between housing affordability and themedian home price in Flathead County. Since 1984, housing affordability and been closely relatedto the median home price, then that all changed in 2004 as the housing bubble drove prices abovethe historic affordability level. In 2011, the median price of $180,000 dropped well below thehistoric affordability level. In 2012 the median price increased to $187,500 and still below thehistoric affordability level. In 2014, the affordability index and the median price are nearly the sameand both are slightly above the historic trend line.

A key factor in affordability is the mortgage interest rate. In 2014 the average 30-year mortgage ratewas around 4.27%, which is up from its historic low of 4.0% in 2012. As interest rates increase,affordability tends to decrease.


FORECLOSURESThis first table shows a seven-year history of the recording of Notices of Trustee Sales that wererecorded at the Flathead County Courthouse. Throughout 2014, the number of notices was generallysimilar to 2013.

The previously addressed notices give a 120-day notice that the lender can foreclose if the paymentsare not brought current.

This next table shows the actual number of Trustee Sales that have occurred over the last sevenyears.

Notices of Trustee Sales

Trustee Sales


COMMERCIAL REAL ESTATE MARKET

The number commercial property sales increased in 2014 and the REO sales decreased, whichcontinues to point to an improving commercial market.


Yearly Commercial Sales:This first graph shows the annual number of commercial building sales that have been reported bythe Realtor’s Multiple Listing Service.

Percentage of New Commercial Listings that Sold:This graph shows a history of the percentage of new listings that were sold.


Commercial Listings Leased:This final graph shows a five-year history of the percentage of new commercial listings that wereoffered for lease and resulted in a closed lease agreement. The red line shows the percentage basedon the number offered and the green line shows the percentage based on the overall square footageoffered. In 2009, 9.5% of the total square footage and 17.9% of the properties that were offeredthrough the MLS system were leased. In 2014, 50.1% of the total square footage and 36.5% of theproperties that were offered resulted in a lease agreement.

Note: This graph only reflect lease listings that were reported thought the Realtor’s MLS system.There are several rental agencies as well as private party leases that are not reflected in this leasegraph.

Overall, the commercial market is improving, but not at the rate that the housing market has in thelast year. Generally, commercial vacancies have been steadily declining, but lease rates have remained depressed from what they were prior to the recent recession.

Commercial New Construction in 2014:Kalispell Building Permits: 14Whitefish Building Permits: 2Columbia Falls Building Permits: None Reported


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