A recent housing report by the University of Montana Bureau of Business and Economic Research comes to a sobering conclusion: “Three years into its real estate slump, Montana’s housing markets do not yet show definitive signs of improvement.”
The report includes all the familiar words Montanans have learned to accept as reality. Foreclosures. Declining prices. Debt. And the words may have to stay in our everyday vocabulary for a while longer.
“Even as the rest of the state economy swings to growth, the data clearly portray the 2010 as another year of adjustment and correction in Montana’s housing markets,” the report states.
But the report offers a “silver lining,” offering a word most people can appreciate, unless they’re trying to sell their homes: “affordability.” Even struggling markets have their upside.
Yet Flathead County remains one of three counties in the state that fall short of Housing and Urban Development’s affordability threshold. The other two counties considered “unaffordable” are Ravalli and Gallatin. Households earning the median income in those counties devote more than 30 percent of their income toward paying for a median-priced home.
The good news, however, is that Flathead and Gallatin “saw significant gains in affordability,” according to HUD’s Housing Affordability Index (HAI). Missoula County is now in the affordable range.
The median price of residential home sales in Flathead County last year dropped to $197,000, down from $249,000 in 2007. The 2010 median price in Gallatin was $244,000, down from a high of $310,000 in 2006.
Gallatin County’s homeowners, however, make much more money than those in the Flathead, while also exceeding national and statewide averages. The median household income among homeowners in Gallatin was $65,777 in 2009, the report states, compared to $51,653 in Flathead.
“(Flathead and Gallatin) remain just shy of the affordability threshold,” it continues.
The report, titled “Housing Affordability and Montana’s Real Estate Markets,” was prepared by UM’s Patrick Barkey and James Sylvester for the Montana Association of Realtors (MAR). The report was released in June. It marks the fourth straight year that the association has partnered with UM’s Bureau of Business and Economic Research to produce the report.
Ronda Tompers, president of the MAR, said depressed prices have combined with low interest rates and ample inventory to create optimal buying conditions.
“Not since the onset of the housing boom have homes in Montana been more affordable than they are right now,” Tompers said. “Whether you are a first-time homebuyer, or an existing homeowner looking to either upgrade or downsize, every market has a great inventory of homes to choose from at attractive prices.”
Across the state, prices have trended downward for two consecutive years, the report notes, with one notable exception, Billings. Falling prices put pressure on lending institutions using real estate as collateral for mortgages while hurting speculative investment, which affects new construction.
“Few observers expect housing markets in general, and new construction in particular, to recover until prices stabilize,” the report says.
According to the report, “the recession hit the Flathead economy harder than any other major urban area in the state,” exacerbating the housing market’s woes. While describing “the evolution of Kalispell into a regional trade and service center” as a positive, the UM report anticipates continued tough times ahead for the overall Flathead economy.
“It will be at least 2014 before real nonfarm labor income (an overall measure of the economy) in Flathead County regains its 2007 peak,” the report states. “It will take even longer for employment to regain its pre-recession level.”