Missoula, Mont., home sales drop, but not from subprimes

— -- In the winter, the Continental Divide protects Missoula, Mont., from the arctic air. It has not, though, protected it from the frigid housing crisis.

Home sales in Missoula County were down sharply in November — 64.2% — compared with a year earlier. Experts say the local mortgage market has been stable, but the national mortgage crisis and the economic downturn have sparked much anxiety.

"People think that things are falling apart here," says Larry Swanson, an economist at the University of Montana. "But we did not overbuild. We didn't have subprime mortgages all over the place. We don't have many foreclosures occurring and causing real estate values to plummet."

In fact, the median home price continues to rise, and is up 11.3% from a year ago.

Home sales, though, are being dragged down by a few factors other than the overall economy.

"In a nutshell, our market is a destination market, and people are not coming here," says Bryan Flaherty, president of the Missoula Organization of Realtors. "They are not able to sell where they now live." As a result, construction has slacked off.

"That's probably the biggest hit that we're taking now," Flaherty says. "Our builders, framers, carpenters, plumbers and electricians are not as busy."

Missoula's economy has a relatively high dependency on construction and real estate, but unemployment still is not as high as the national average, Swanson says. That's because local industries also include health care and professional services. And Missoula is home to the University of Montana, which is a source of stability, he says.

Despite the national economic meltdown, lower mortgage rates and affordable homes may help Missoula's housing market.

"I think the housing market is going to slide through it, although we're going to be beaten up," Swanson says.