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Real Estate Recovery - Montana's Economic Recovery May Not Include Construction

By Jason Frey

Real Estate Agent with PureWest, Inc.

August 09, 2011 10:43 AM

HELENA (AP) – A University of Montana economist says the state’s economic recovery likely will happen without a boost in the construction industry.

Patrick Barkey, the director of UM’s Bureau of Business and Economic Research, is presenting a mid-year economic update across the state titled “Montana’s Construction-less Recovery.” The Independent Record reports (http://bit.ly/ppc8Hf) he was in Helena Monday.

Barkey says the bureau forecasts continued growth in household and corporate earnings, is optimistic about energy and agriculture, but expects a stagnant construction and wood product industry.

Barkey says fewer people moved from state-to-state last year, reducing demand for new housing.

Montana Building Industry Association executive director Dustin Stewart says housing usually leads the economy out of a recession. He says once the economy starts to recover, housing will follow.

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Lenn Harley

Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA

Real Estate Broker - Virginia & Maryland

I read Mr. Barkey's report and he's right on the money.

Folks aren't moving to Montana because they are stuck where they are in a house with an underwater mortgage.

That is why I have focused on 1st time home buyers but that's a tough market.

I miss relocating and move-up buyers.

Aug 09, 2011 10:50 AM

Jason Frey

PureWest, Inc. - Livingston, MT

Lenn - I miss relocating and move-up buyers as well! I think his report touches on some key components, specifically growth in agriculture. We have seen large ranches trading with some frequency starting Q4 2010. These are not the recreational properties that were hot in 04-07 but ranches that have a significant agricultrual component to them, extensive cow herds or a large percentage of dry land/irrigated production. Thanks for commenting Lenn!

Aug 09, 2011 11:06 AM

Ruthmarie Hicks

Keller Williams NY Realty - 120 Bloomingdale Road #101, White Plains NY 10605 - White Plains, NY

Hi Lenn, That's the reason I went after first time buyers. It turned out to be a problem because I couldn't generate enough volume. The trouble with first time buyers is that the urgency isn't there - they can always RENT again. I've never heard those deadly words "We are in no hurrry to buy" so often as I had with this group. Add to that the inflated expectatations that many young people have and its very difficult to get these guys to settle for what amounts to "reality."

It's too bad because construction jobs and all the trades that they encourage put people to work and allow money to circulate locally. Its a an area of employment that can not be outsourced.

Aug 09, 2011 12:44 PM

Wanda Thomas

Montana Homestead Brokers, Broker, CRS, GRI, SFR, RN - Billings, MT

Billings Montana Real Estate

Lot sales are just plain terrible, even with some of the prices coming down. You hit the nail on the head Jason, construction of new homes has fed our local economy in a bit way, and lots of those companies have been hit very hard.

When I do see a few spec homes out there, I just hope their shelf life is better than it has been the last couple of years. People love new homes, when they're in the buying mood.

First time home buyers are really tough, I just met with some tonight, you can tell they want to do something, but they're checkbooks just won't come out of their pockets, dang it!

Aug 09, 2011 03:25 PM

Gary Woltal

Keller Williams Realty - Flower Mound, TX

Assoc. Broker Realtor SFR Dallas Ft. Worth

Jason, great update and it does make sense if the demand for new housing is tepid the construction job need will be weak as well. Thanks for your updates from Montana.

Aug 10, 2011 01:50 AM

Barbara-Jo Roberts Berberi, MA, PSA, TRC - Greater Clearwater Florida Residential Real Estate Professional

Charles Rutenberg Realty - Clearwater, FL

Palm Harbor, Dunedin, Clearwater, Safety Harbor

It is always wonderful to hear about real estate recovery - down here there is also not much new construction going on.

Aug 10, 2011 02:12 AM

Richie Alan Naggar

people first...then business Ran Right Realty - Riverside, CA

agent & author

How can new compete with existing remains mathematical in nature. Developers just cannot compete on pricing offering only the obvious which is new construction with years of little or no maintenance. What is scary around my neck of the woods is that we were a construction driven county and it has come to an abrupt halt. Good awareness post

Aug 10, 2011 03:45 AM

Jason Frey

PureWest, Inc. - Livingston, MT

Ruthmarie - Thank you for your comments. You are correct that the construction industry puts people to work and circulates money locally. We have seen some "outsourcing" so to speak, as framing, drywall and masonry crews from markets that have been hit more significantly than ours have traveled as far as 1,500 miles to pursue jobs here in the resort and second home markets.

Aug 10, 2011 05:10 AM

Jason Frey

PureWest, Inc. - Livingston, MT

Wanda - I feel your pain. We have had some bright spots in the Bozeman/Paradise Valley markets however. The Alder Creek Subdivision in Bozeman has been hot, a new school will do that. A local builder purchased 14 parcels and has sold through 4-5 that I know of in the last month and construction has begun on roughly that same number of homes. They are not being built on spec but they are being built. Good luck getting those checkbooks released!

Aug 10, 2011 05:14 AM

Jason Frey

PureWest, Inc. - Livingston, MT

Gary - Thank you for your comments. As I said in response to Wanda, it is good to be seeing some new construction in our market. It is a significant driver for the local economy, in 2007 I believe that 10 of the top 25 businesses in our county on a gross sales basis were either construction companies themselves or directly related to the construction industry.

Aug 10, 2011 05:17 AM

Jason Frey

PureWest, Inc. - Livingston, MT

Barbara Jo - We are slowly seeing the signs of the market beginning to loosen, "cautiously optimistic" is a term I use and hear quite often. It will take some time for a semblance of balance to be found, but we'll get there. Thanks for your comments.

Aug 10, 2011 05:19 AM

Jason Frey

PureWest, Inc. - Livingston, MT

Richie - to steal a phrase from the construction industry, you hit the nail on the head. As I responded to Gary in comment #11, we were/are a highly construction driven economy here in Bozeman/Big Sky as well, and although there are still a fair number of homes being constructed on the upper end of the market in second home and resort areas, we have seen a halt in spec construction especially. We have one developer who has come into the market at a great time and taken over a golf course development out of bankruptcy that I think has an outstanding opportunity to be successful, but there are not many other people in that position.

Aug 10, 2011 05:24 AM

Jason Frey

PureWest, Inc. - Livingston, MT

Mr. Yates - so nice to see your comments and thank you for the kind words. I have several people that I am working with from SoCal that are waiting to make purchases until their homes sell. Same goes for clients from Houston, Chicago, Portland, Las Vegas and Atlanta. Life is one giant intermingling, pull on one strand of the web and it sends vibrations through the whole thing. I appreciate your confidence and willingness to send referral business my way. I'm eager to participate in your win-win-win referral program. Thanks again and All Best to you.

Aug 10, 2011 08:54 AM