Led by Silverbrook, Construction Has a Pulse

By Beacon Staff

After a year of stagnancy in Kalispell’s residential housing sector, building permits through May show that construction activity is outpacing 2009 but lagging behind 2008.

And while some of the permits are for smaller projects, such as remodels or decks, there has been a notable increase in new housing starts. Kalispell Planning Director Tom Jentz said last week the city had processed building permits for 38 housing units, compared to 23 at the same time last year.

“Is it a groundswell? No,” Jentz said. “But it’s definitely a change in the trend and it’s a good change. Thirty-eight houses is quite a lot of construction. Last year was the bottom of the trough for activity in the valley.”

Leading the building increase is the Silverbrook Estates development north of Kalispell, where 10 houses are under construction, to go along with 10 already-completed houses.

Larry Sartain, broker for Silverbrook Realty, said prices were significantly lowered – by as much as 30 percent – for the subdivision’s completed spec houses to stimulate interest in a market full of wary consumers.

So far, the move has worked. Not only have the reduced prices led to five sales of spec homes in the $219,950-239,950 range, the development has also sold five of the more expensive homes under construction that are priced between $279,000-379,000. Lots have also been selling well.

“That was really kind of an unexpected, pleasant surprise,” Sartain said of the pricier homes selling.

But the reduced prices have inevitably come at a cost.

“Some of them we’re breaking even on and some we’re making money on,” Sartain said. “We’re working on a small profit margin – a small, miniscule profit margin.”

At the height of the building boom, large subdivisions were popping up everywhere around the valley. But after the market crashed, some of those developments never got off the ground and are today sitting abandoned.

Silverbrook Estates, however, has one major advantage over other developments trying to get on their feet, Jentz said. By already having its base infrastructure in place, the subdivision has more than just a plan to sell.

The development spent more than $4 million to get water and sewer lines there. The money was spent with the expectation that future development would hook up to the lines and make up for the initial costs. Although no development is currently taking place around Silverbrook, Sartain believes it will come in the future.

“We’re confident that we’ll get some other development that will tie into it,” Sartain said. “Right now, we’re on an island.”

Also, Silverbrook’s amenities, such as its clubhouse, are already built.

“Our homes are one thing; our subdivison is a whole other thing,” Sartain said. “We heave more amenities to offer than any other subdivison short of Iron Horse. And since the amenities are completed, people don’t have to guess what’s coming in the future.”

Jentz said other subdivisions like Bloomstone and Starling never got started before the recession took hold, giving Silverbrook a leg up as the market begins to show signs of recovery. Dropping the home prices only puts Silverbrook that much farther ahead.

“For the amenity package they offer and for who they’re catering to, that’s a tremendous deal,” Jentz said. “That subdivison offers a lot. It’s a great subdivison.”

Other subdivisions are seeing building activity as well, Jentz said. Spring Creek Estates on Three Mile Drive has reduced its lot prices to encourage growth, he said, and just north at Mountain Vista there are signs of life.

“If you drive around out there, you’re going to see activity,” Jentz said.

He added: “With the price of the lots coming down, the builder can build the house at a lower price point and bring entry-level homebuyers into the market. But it’s still tough getting mortgages.”

Activity at Silverbrook Estates is occurring in the development’s first two phases: the Creekside South and Riverside South communities. Future phases include Riverside North and Creekside North, along with townhomes and a commercial town center.

Originally, four larger spec homes were built for a price range above $500,000, but after garnering little interest, smaller spec homes were built at significantly lower prices.

“The homes in the $500,000 to 700,000 range weren’t moving, so we brought it back closer to $200,000 and $300,000 and that’s really where it started,” Sartain said.

The smaller homes are 1,250-1,565 square feet and the bigger ones, which are under construction, are 1,900-2,400 square feet. Following a prolonged period of inactivity, the recent sales make Sartain optimistic.

“It’s pretty encouraging,” he said. “I think we’ve turned the corner.”