Last year was abysmal for the real estate and construction markets in the Flathead, though other sectors of the local economy may be starting to improve, according to analysts at the ninth annual “Future of the Flathead” breakfast seminar.
Jim Kelley, a real estate appraiser who closely tracks data related to real estate and construction in the Flathead, explicitly connected the loss of jobs in the valley to the downturn in home sales and construction, and said that until the labor market rebounds, the housing market is unlikely to do the same.
Since the recession began, 5,343 jobs have been lost in Flathead County, according to Kelley. That puts the number of people employed in the county at roughly the same level it was in 2003. When the high in the labor force in 2008 is compared to the current number employed, that makes the current 12.1 percent unemployment level more like 16.6 percent.
“It suggests that we may end up seeing a decline in population too as people end up moving somewhere else to try and find jobs,” Kelley said. “If people are not moving here then there’s not going to be demand for new construction.”
“I’m being rather blunt on some of this, but might as well go ahead and just say it,” he added.
Kelley’s remarks were met with resignation from the large crowd of businesspeople filling a room at Flathead Valley Community College’s arts and technology building Jan. 26. Sponsored by Montana West Economic Development, the Future of the Flathead breakfast was originally conceived as a way to keep up with the trends of the valley’s rapid growth. But as the recession settled in, over the last several years the seminar has illuminated some of the ways in which northwest Montana is among one of the hardest hit regions of the state.
A few snapshots from Kelley’s presentation: There were zero new lots created in the city of Kalispell last year, down from a high of 582 in 2006. New home construction in all of Flathead County was down 20 percent. Kelley estimates roughly 19 months of unsold inventory in the county. Median prices for homes on less than 2 acres, with no waterfront, continue to decline, though sales volume increased 27 percent. The volume of home sales on Flathead Lake has almost returned to 2007 levels, due mainly to a drop in price of about 40 percent. Eighty percent of homes sold in 2010 were $300,000 or cheaper.
The one exception to the trends was Bigfork and Lakeside, where median home prices and sales volume increased. Kelley cautioned that because the number of homes being sold and built is so low, that figures like average home prices, or percentage-increases or decreases could vary wildly based on one expensive home sale.
On the bright side, the median home price is now much more affordable than in 2007, and the average interest rate for a 30-year mortgage was 5.1 percent last year. This would make homes more affordable, if the job climate in the Flathead was healthier.
“If we don’t have jobs then that absolutely screws up this entire chart,” Kelley said at one point during his Power Point presentation. “In theory, if we have jobs, then things are very affordable at this point.”
His prescription was simple, though one not necessarily easily accomplished: “Stop the bleeding in the population, and we need to go ahead and get jobs coming back.”
Following Kelley’s talk, Dr. Brad Eldredge, FVCC’s director of institutional research, planning and investment outlined the Federal Reserve banks policy of “qualitative easing,” which is essentially printing digital money to avoid deflation. Though the talk was aimed at identifying the potential threat of inflation, Eldredge described the Fed’s policy as being one focused on preventing deflation, which the central bank regards as a greater threat.
“They think that if inflation starts to rear its ugly head that they can pull that money back out of the system,” Eldredge said.
Turning to the Flathead economy, Eldredge offered a bit of optimism, suggesting that the valley’s job market has nowhere to go but up.
“We actually added jobs in the most recent year for which we have data,” Eldredge said. “We added five.”
“If that means we hit bottom, I’ll take it,” he added.
Though much of the news was grim, Kellie Danielson, president and CEO of Montana West Economic Development, reported that her agency continued to court businesses from elsewhere, and that it was important for all businesspeople to act as ambassadors for the Flathead.
“Our strength is quality of life, our weakness is transportation,” she said. “We have to let people know this is a good place to do business.”
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