Analyst sees local housing bust looming on the horizon

By RICHARD HANNERS / Whitefish Pilot

A slowdown in local construction and real estate sales is real, and it could be a harbinger of more serious economic problems, a Whitefish financial analyst says.

Jim Stack, who owns and operates InvesTech Research and Stack Finan-cial Management, says he sees problems already in the Flathead Valley and Whitefish housing markets.

"Whitefish is sitting on a powder keg," he said. "There's a huge number of unsold homes. The planning department was shocked at the recent drop in building permits and subdivision applications."

Stack said there is currently a five-year supply of homes on the market selling for more than $500,000.

"Normally, a 12-month supply is bad," he said. "This is what drives the Whitefish economy — from builders, Realtors and title companies to furniture stores."

About one-sixteenth of the area's homes are on the market, and home sales have dropped by about 32 percent in Whitefish and 24 percent in the county.

"Prices are last to drop," Stack said. "The problem first shows up in inventory. Then builders see a slow down and Realtors see a drop in sales. Then prices fall."

There's a false impression here that higher real estate values elsewhere make the local real estate market look good, Stack said, but with the high number of foreclosures in California and other parts of the nation, and property prices declining by double-digit amounts in some locations, owners will be reluctant or unable to sell to move here.

At any rate, Stack said people in California are looking for second homes — they won't sell their primary homes to move here.

"It's that winter thing — it drives people away," he said. "If they don't like to ski, they won't like winter here."

Stack also doubts that the strength of the Canadian economy and its dollar will make a significant difference.

"That won't stop a boom-and-bust cycle," he said.

The Flathead and Whitefish real estate market has to compete with other areas that offer similar amenities — lakes and streams, mountain vistas, national forest lands and parks, and rural open spaces. Some of these areas have been well-known for more than a decade, while others are just growing in popularity.

Stack points out that in 2000, the median price for a home in the Flathead was about 20 percent below the national median price. The numbers have flip-flopped since then — the median price in the Flathead is now about 20 percent above the national median.

"We've gone from being a good buy to being more expensive," he said.

A significant slow-down of the housing industry in the Flathead and Whitefish could result in serious impacts to the local economy, Stack said.

"Seventy percent of the new jobs in Whitefish that were created in the past 7-8 years are construction-related," he said. "If there's a bust, there will be repercussions."

Housing slowdown hits Flathead