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North Bozeman vs. South Bozeman: A Tale of Two Markets

Joe Mahar, of Mahar Homes, was the primary builder of Alder Creek and Harvest Creek Subdivisions in the early 2000s. He simultaneously built essentially the same product in North Bozeman and South Bozeman, making these neighborhoods outstanding case studies for north vs. south Bozeman growth.

In 2015, the average Harvest Creek bungalow home was available for purchase for $309,812. At the same time, a comparable Alder Creek bungalow home would have cost $425,231. In 2015, the southside neighborhood Alder Creek commanded 28% more than Harvest Creek for the same builder, similar finishes,  and comparable floorplans. I find this variance in value interesting, as the north side offers easier access to shopping and Downtown than the south side. However, the south side offers quicker access to Hyalite and Big Sky. 

Review the data for those same two neighborhoods in 2024, and the sold price discrepancy compounded, with Harvest Creek homes selling for 68% of the comparable Alder Creek Home. 

Mountain Contemporary: A Coveted Bozeman Construction Style

Valley West was groundbreaking in Bozeman, our first contemporary subdivision! This nearly 310-acre planned unit subdivision was thoughtfully designed to foster community and neighborhood connection. This subdivision has grown exponentially in value over the last ten years due to its interconnected community ponds, lighted walking trails, and easy access to private and public elementary schools. In 2015, the average single-family home sold for $328,299 in Valley West. That same home would have sold for $1,006,438 in 2024, a 300% explosion in value in 9 years, or 33% per year growth, on average.

Flanders Mill followed Valley West’s contemporary design and added a mountain rustic flare to the finish package.

 Also well-located and intentionally designed, Flanders Mill is just north of Valley West. About 15 years newer than Valley West, Flanders Mill is ideally positioned adjacent to the Gallatin County Regional Park, and with linear trails, ponds, and open space, the feel of Flanders Mill is also community-focused. One notable difference between Flanders Mill and Valley West is that Flanders Mill features larger lot sizes than Valley West, creating a more expansive flow to the community. As Flanders Mill was developed in 2015-2016, we don’t have sold data from 2015. However, the first single-family sales in the neighborhood averaged $468,224 in 2017. That same property in 2024 would have sold for $1,088,607. In only seven years, Flanders Mill homes grew in value by over 230% or 33% per year on average.

Understanding Demand: What has Shifted?

• Buyers have reset their expectations to again accept interest rates in the 6-7% range, a historic norm for the USA. 

• Bottled-up demand is breaking free as buyers can’t continue to hold in anticipation of a rate change.

• Properties that closed in February 2025 averaged 210 days on the market and successfully closed by negotiating more than 6% off the list price. 

• Between December 2024 and January 2025, the market realized a 9% reduction in sold prices, meaning prices finally adjusted to reflect the interest rates and, therefore, realized a transition from offered for sale to sold! 

Sale Scenario 1:

Let’s make a few assumptions: 

• The owners paid the average sales price in 2015 of $328,299 and sold in 2024 for the average sales price in that neighborhood of $1,006,438, therefore realizing $678,139 in gain (before selling costs, which are tax deductible). 

• It costs the seller approximately 7% to sell their property, adjusting their gain to $607,688, after 9 years. 

• They are married; therefore, they could retain $500,000 without a taxable event

•   $107,688 could potentially be taxed as ordinary income on their 2024 taxes.

• Assuming they are paying in the 20% tax bracket, the married seller may owe $21,537 in ordinary income for the sale of their primary residence.

_________ 

• If the same seller were single, they would only benefit from a $250,000 deduction and be left with $357,688 in potentially taxable ordinary income for their 2024 taxes from their primary home sale! 

• Like the married couple, they are paying at a 20% tax rate and therefore, they may owe the government $71,537 in their 2024 tax bill from the proceeds of their primary residence. This is absolutely a taxable event you’d want to plan for and be aware of, before selling.

Now, assume that the same seller from the scenario above purchased in 2015 and then sold that property and bought their neighbor’s house in 2020, and then sold that house and bought their first house back in 2024. They would have had the experience of moving twice in a 9-year spread, but assuming they were a married couple, they would have entirely avoided taxation on their gain.

Sale Scenario 2: 

• The average Valley West house cost $328,299 in 2015. 
• They sold that house for the average sales price in 2020 of $548,519, or roughly $220,220 in gain. This first sale is not a taxable event whether the seller is married or single! 
• It costs the seller 7% to sell, deducting $38,396 from their take-home profit
• Their take-home after sale 1 is $181,823 in 5 years, or a $36,000 per-year gain. 
• They also purchased a home in Valley West in 2015 for the average price of $548,519 and sold that property in 2024 for $1,006,438. 
• Before selling fees, the married couple would still avoid ordinary income taxation, as they would realize $457,919 in gain, under that $500,000 threshold. 
• Assuming that they paid 7% in closing costs to sell, they would net $425,864 in profit. 
• Adding the 2020 gain to the 2024 their realized gain would be $607,687 – tax free. 

_________ 

• The single seller in that same period wouldn’t completely avoid all taxation but could be paying $35,172 in ordinary income taxes from the same sale, assuming they were in a 20% tax bracket.
• This is a notable improvement from the tax bill they acquired by keeping the house for 9 years, as they were able to avoid taxation on that first sale with $220,220 in gain, and then benefit from the $250,000 exemption on the second sale and only pay on that smaller gain.

Moving one time in Bozeman in nine years earned the married couple an additional $26,133 in profit, or an additional 5%, and the single person $40,960 or a further 7%. Consider this scenario when you feel like your 2020 3% interest rate has you locked into your current property.