A Tale of Two Booms

The sun is out and construction crews around the valley are pushing dirt, pouring concrete, raising frames, and putting their mark on the Flathead’s vision for the future.

It’s an exciting time, with Flathead County and the municipalities within its borders growing at some of the fastest rates in the state and job openings abounding.

For anyone who has lived in or visited the valley for longer than a decade, however, the activity might bring a sense of déjà vu, harkening back to how the Flathead felt in the early 2000s, right before the great recession wiped out many gains earned in the first half decade.

But housing and construction experts say the two booms aren’t identical; the current explosion in housing and construction is largely driven by residential needs, not the commercial retail bonanza of the early 2000s. Officials also said the boom is more controlled due to less speculative pricing and added regulations, especially on the lending side.

This May broke all previous records in residential sales for a single month, according to Jim Kelley of Kelley Appraisal, with 209 residential sales in Flathead County. The previous record was 173 sales in 2006, right before the recession took hold.

The May 2017 sales outpaced the previous record by 21 percent.

“It’s the same but different,” Tom Jentz, planning director for the city of Kalispell, said of the two boom times. “It’s not retail that’s pushing the construction industry out there. We’re running at about half of the retail construction activity in the pre-recession boom.”

Jentz said that in 2007, Kalispell built about 200,000 square feet of retail space. In 2016, retail construction equaled about 100,000 square feet, he said.

The big push in the current boom is for multi-family housing and more affordable housing options. When the pre-recession boom raged, there were already many subdivision lots available and ready to go, Jentz said. Now, there are several projects in the pipeline, but there is a dearth of building space in town.

“We just have a significant shortage of single-family or two-unit housing lots in town,” Jentz said.

Jentz said Kalispell has two apartment complexes currently at the city planning board stage, one with 14 units and another with 24. Another project with 55 units planned for Airport Road is in the works, as is a project for 106 units on Meridian Court that just went before the Kalispell City Council.

That project received planning board and council support, Jentz said, but it’s still a year away from fruition. And there are likely more projects on the way — Jentz said the planning department has received interest for building between 500 and 1,000 more multi-family units.

“You may only ever see half of that built, but what it is, it indicates the pressure,” Jentz said. “We’ve never had the multi-family housing pressure before.”

In Flathead County, there were 180 residential lots approved and created in 2016, along with two commercial or industrial lots. According to the county Planning and Zoning Department, there are more than 1,030 residential lots actively in the preliminary plat stage, including a subdivision with 182 planned lots.

Those won’t be ready for houses until they reach final plat, if ever.

Whitefish, which continues to struggle with affordable housing options for its residents, has permitted 20 single-family homes so far this year, along with seven multi-family projects.

As the president of the Flathead Building Association, Andrew Sliter of Sliters Lumber & Building Supply said the recession halted many subdivisions in their tracks, leaving builders in a lurch.

“We haven’t had a major subdivision in how long? The lot inventory that we’ve been chewing away on over the last 10 years have been lots that were created in ‘04, ‘05 and ‘06,” Sliter said.

There were 1,089 residential land sales in 2005, compared to only 156 in 2009, according to Kelley Appraisal. Land sales started creeping up again in 2012 with 327, followed by 527 in 2013. Residential land sales remained at about 480 in 2015 and 2016.

Kelley said May’s residential-sale numbers were surprisingly high, but only represent one month out of an entire year. So far, June’s numbers are slightly down from last year’s, he said.

A barrage of home purchases indicates a healthier economy, and Kelley said there’s also a chance that low-interest rates, which are expected to increase, have influenced people’s decisions to buy.

The housing market has also reached a seller’s market at certain price ranges, especially between $150,000 and $250,000. Mark Nelson, a realtor with PureWest Real Estate, said first-time homebuyers are facing challenges since those homes are snapped up quickly.

“They’re gone within 24 hours if it’s priced right; that’s the kind of market we’re in right now,” Nelson said.

A $250,000 home had six showings in just 48 hours, and had an offer within two days of being on the market, Nelson said, and a home priced at $247,500 was expected to go on the market and be under contract within a week.

This price range also attracts investors who want to buy the properties and then rent them, Nelson said.

Annual residential sales still aren’t at the extreme highs of 2005 and 2006, Kelley noted. In 2005, there were 1,789 residential sales with a median price of $220,000, followed by 1,870 sales with a median price of $245,000 in 2006. The following year, there were 1,357 residential sales with a median price of $250,000.

After the recession hit, the numbers dropped significantly. In 2008, there were 984 sales, and the median price fell to $239,000. By 2009, there were 912 sales with a median price of $200,000; the overall sale numbers crept back up to 1,039 in 2010, but that was due to a large number of distressed sales and a median price of $197,000.

Median prices for Flathead County homes hit a low in 2011 at $180,000, and started the slow work of growing again. In 2014, median prices were back to $230,000, with 1,505 residential sales.

Last year saw a total of 1,680 residential sales, almost mirroring the 1,683 from 2015. The difference between the years, Kelley noted, was that 2015’s median sale price was $242,500, and by 2016 that jumped to $255,000, higher than even in the pre-recession boom.

These days, Kelley said, people aren’t typically buying, flipping, and reselling the homes they buy, as was the popular practice in the early 2000s.

“Right now, the properties for the most part are being bought by owner occupants,” Kelley said. “That speculative market (of the early 2000s) contributed to the rapid increase in prices and contributed largely to the overall collapse because that was going on across the nation.”

Lenders are also under more stringent guidelines for loans now than they were in the pre-recession boom, due to regulations created during the recession.

One of the downsides of the boom has been the challenge to find skilled labor, Sliter said. At the heart of the economic downturn, people were learning new trades as they left construction, he said, and that vacuum didn’t need to be filled until about now.

“From a labor standpoint, through the downturn, who would’ve advised a young individual to go into the building trades over the last 10 years?” Sliter said. “Skilled trades are in short supply or they’re tough to find.”

The FBA supports programs such as the student-built housing program at Flathead High School, Sliter said, because students will earn important experience, and “one of the things they should look forward to is gainful employment.”

One major factor contributing to growth is the emergence of health care in the Flathead as an economic driver. The Immanuel Lutheran Communities have a $43 million project in the works, while Kalispell Regional Healthcare is building a $37 million women’s and children’s department and a $13 million digestion center.

There are also health care clinics “popping up all over town,” Jentz said, with another four currently in process.

“This boom, the medical jobs pay above moderate,” Jentz said. “The construction jobs are good, the employment is good and it lets people move up the food chain on their housing opportunities.”

Jentz said that while the boom times are exciting, the current “breakneck speeds” of development aren’t sustainable in the long run. Planning how the cities and county want to grow in the future will be a big part of the conversation, Jentz said, especially as growth begins to connect different communities.

Growth will continue, though, and the market will determine its speed. Sliter said one of the Flathead’s attributes is that it is a place people want to be, and how that plays out as the economy continues to grow will be anyone’s guess.

“What’s amazing is that people are looking for communities just like ours and there’s not very many of them around,” Sliter said. “The Flathead Valley is pretty unique. It’ll be an interesting next five years.”