News & Features

In a Year of ‘Healthy Growth,’ Kalispell Construction Spending Spikes

Flathead County residential sales surged last year to highest level since 2006

When reflecting on last year in Kalispell and Flathead County, Tom Jentz sums it up in two words — healthy growth.

The planning director for Kalispell sees several trends that continued or emerged in 2015 that contribute to his optimistic assessment.

Among the state’s largest cities, Kalispell has had the second highest population growth rate, 8 percent from 2010 to 2014, behind only Bozeman, 11.7 percent, according to Census data.

“We continue to grow at a healthy rate,” he said.

Development continues to pick back up. In Kalispell, the total value of construction — $64 million in private investment — was the most since 2007 and a 40 percent increase over 2014, according to city data.

“That is actual construction dollars. That is a big number,” Jentz said. “(2015) was a good construction year.”

Jentz’s office released a new report last week that details every construction niche in the valley.

That report shows a total of 106,153 square feet of new commercial construction emerged last year in Kalispell, including the 60,000-square-foot Marriott hotel being built near Kidsports Complex. In 2014, a total of 149,895 square feet of new commercial business surfaced.

Instead of retail development driving last year’s growth, other key industries fueled the economy’s expansion, including health care. Kalispell Regional Healthcare is expected to continue investing in new development this year. Several other major projects are also in the works, including the Spring Prairie Phase Four lot where the Marriott is opening. That lot is expected to start filling in after infrastructure is finished this summer. There is also the Glacier Rail Park being developed off Whitefish Stage Road and the expected ripple effects of the city’s core area redevelopment plan.

In the residential real estate market, a 96-unit apartment complex is being built near Kidsports Complex in the Bloomstone subdivision. It’s the largest multi-family development in the city since 2004 and will help address Kalispell’s lingering shortage of rental options, Jentz said. A total of 125 multi-family units were built in the city between 2009-2014.

Flathead Valley Community College has announced plans to build a new 100-unit student housing building.

The number of new single-family residences built in Kalispell dipped 11 percent, from 81 in 2014 to 72 in 2015.

Jentz said this decline could largely be attributed to the shortage of affordable lots in city limits. As a result, more homes are being built on the outskirts of town in the county, according to building data.

The county does not issue building permits and the best way to estimate new home building is through the number of septic permits; in 2015, a total of 466 septic inspections occurred outside municipalities in the county for both residential and commercial developments, according to figures compiled by local appraiser Jim Kelley. These figures can be somewhat misleading when trying to identify how many homes emerged from those inspections because if there is a community sewer system, several new homes could be under one septic inspection, Kelley noted.

In 2014, there were 341 septic inspections.

One factor that could be pushing new residential development out of Kalispell’s city limits is impact fees.

In order to get a building permit for a new home in Kalispell, a developer must pay roughly $10,000 for a flat impact fee, which covers water, sewer, stormwater, police and fire services. To build in the county, a developer must pay between $200-$500 to connect to a community water system or pay roughly $7,000 for a septic installation.

“The builder takes on those costs when they get the building permits and then the cost goes up for homeowners,” said Myrna Terry, vice president of Ron Terry Construction, a local homebuilder. “It makes it that much more expensive to build in Kalispell. My concern is that prices are already going up left and right from manufacturers and suppliers.”

The city council is revisiting the topic of impact fees with the goal of addressing the issue of fewer homes being developed in town.

In Whitefish, 48 new homes were built last year compared to 72 in 2014. There were also 12 new duplex or townhomes and 14 multi-family homes built.

In Columbia Falls, 15 new homes were built compared to 19 in 2014. Fourteen new multi-family units were also added last year, compared to only two the previous year.

The overall number of new residential units built in Flathead County last year increased 32 percent over 2014.

The number of homes sold on the market jumped 11 percent in 2015, according to Kelley. Last year was the best year for home sales in Flathead County since 2006, Kelley said. The median price of a sold home was $242,500, a 5.4 percent increase over 2014. That is still 3 percent below the 2007 high of $250,000.

Residential land sales were down last year.

According to data compiled by local realtor David Fetveit, the local luxury real estate market showed a bit of a recovery last year. The total sales volume of luxury homes — defined as homes priced at or above $1 million — increased nearly 13 percent last year compared to 2014 but remains nearly equal to the 2013 sales. The number of units sold increased annually by more than 20 percent, according to Fetveit.

“As we go into 2016, it will be interesting to see if the strong market that existed all through 2015 will continue,” Kelley stated in his report.

Last year the average 30-year mortgage interest rate was just under 4 percent, which was a key factor driving the high sales volume, Kelley said. In December, the Federal Reserve increased that rate for the first time in several years, which could likely result in a higher mortgage interest rate in 2016.

Economists are also keeping a close eye on underwhelming wage gains as a key factor that could influence the nation’s economy in 2016.

To read the city of Kalispell’s development report, visit kalispell.com/planning. To read Kelley’s real estate report, visit kelleyappraisal.net.

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