The Outlook for Real Estate and Residential Construction Patrick M. Barkey, Director Bureau of Business and Economic Research University of Montana
Montana s Real Estate Performance: Getting Back to Boom Times? Housing prices exceeded their pre-recession peaks two years ago Homeownership becoming more attractive Credit standards continue to ease New home construction still not strong Speculative behavior not apparent in Montana
U.S. Housing Prices Have Recovered to Their Pre-Recession Peak Index, 1995=100 240 FHFA Housing Price Index, U.S., 1995=100 220 200 180 160 140 Inflation-Corrected 120 100 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 Source: Federal Housing Finance Agency, Bureau of Economic Analysis
Montana s Housing Price Recovery Occurred Two Years Ago Index, 1995=100 260 FHFA Housing Price Index, Montana, 1995=100 240 220 200 180 160 Inflation-Corrected 140 120 100 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 Source: Federal Housing Finance Agency, Bureau of Economic Analysis
Growth in Rents Has Increased Since 2011 $750 $700 3.5 % per year -.1% per year $650 $600 $550 $500 5.4 % per year $450 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Montana Residential Rent, Inflation Adjusted (2014$) Source: U.S. Census Bureau.
Boom, Bust, and Recovery of Montana Real Estate Percent 190 180 Housing Prices 170 160 150 140 130 120 Median Household Income 110 100 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Montana Housing Price Index and Montana Median Household Income Index, 2001 = 100 Source: U.S. Federal Housing Finance Agency and Census Bureau.
Will the Erosion of Homeownership Rates Continue? Percent 76% 74% Montana 72% 70% 68% 66% U.S. 64% 62% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: U.S. Census Bureau
Sales Volumes and Median Prices Up Strongly Since 2012 Percent 80 70 60 50 40 30 20 10 0 Cascade Flathead Gallatin Lewis & Clark Sales Median Price Missoula Silver Bow Yellowstone Source: Montana Department of Revenue
Sales Volumes Plunge Since 2012 Reflect Oil Bust in East Percent 30 20 10 0 10 20 30 40 Custer Sales Median Price Richland Source: Montana Department of Revenue
1,000 950 900 850 800 750 700 Markets Looking Much Healthier Cascade County Market Statistics Number of Sales Median Sale Price Days on Market $180,000 145 135 125 $170,000 115 105 95 $160,000 85 75 $150,000 65 55 45 $140,000 35 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016 Source: Great Falls Association of Realtors.
Market Has Been Transformed Since 2010 Richland County Market Statistics Number of Sales Median Sale Price 180 $250,000 160 140 $200,000 120 100 $150,000 80 60 $100,000 40 $50,000 20 0 2010 2011 2012 2013 2014 2015 $0 2010 2011 2012 2013 2014 2015 Source: Montana Department of Revenue.
Little Change in Market Activity Custer County Market Statistics Number of Sales Median Sale Price 250 $160,000 200 $140,000 $120,000 150 $100,000 $80,000 100 $60,000 50 $40,000 $20,000 0 2010 2011 2012 2013 2014 2015 $0 2010 2011 2012 2013 2014 2015 Source: Montana Department of Revenue.
Markets Looking Much Healthier Flathead County Market Statistics Number of Sales Median Sale Price 2,000 $250,000 1,800 $240,000 1,600 $230,000 1,400 $220,000 1,200 $210,000 1,000 $200,000 800 $190,000 600 2010 2011 2012 2013 2014 2015 $180,000 2010 2011 2012 2013 2014 2015 Source: Montana Department of Revenue.
Market Continues to Heat Up Gallatin County Market Statistics for Single Family Homes 1,600 Number of Sales $370,000 Median Sale Price 120 Days on Market 1,400 $345,000 110 1,200 $320,000 100 $295,000 1,000 $270,000 90 800 $245,000 80 600 10 11 12 13 14 15 16 $220,000 10 11 12 13 14 15 16 70 2010 2011 2012 2013 2014 2015 2016 Source: Gallatin Association of Realtors.
Sale Price Growth Missoula County Market Statistics 1,800 Number of Sales $250,000 Median Sale Price 1,600 1,400 $240,000 1,200 $230,000 1,000 800 $220,000 600 $210,000 400 200 $200,000 0 2010 2011 2012 2013 2014 2015 $190,000 2010 2011 2012 2013 2014 2015 Source: Montana Department of Revenue.
Markets Looking Much Healthier 600 Ravalli County Market Statistics Number of Sales $240,000 Median Sale Price 550 500 $230,000 450 400 $220,000 350 $210,000 300 250 $200,000 200 150 2010 2011 2012 2013 2014 2015 $190,000 2010 2011 2012 2013 2014 2015 Source: Montana Department of Revenue.
Markets Cooled Slightly in 2016 Yellowstone County Market Statistics for Single Family Homes 2,600 Number of Sales $220,000 Median Sale Price 85 Days on Market 2,400 $215,000 2,200 2,000 1,800 1,600 1,400 1,200 1,000 $210,000 $205,000 $200,000 $195,000 $190,000 $185,000 75 65 55 45 800 $180,000 600 11 12 13 14 15 16 $175,000 11 12 13 14 15 16 35 2011 2012 2013 2014 2015 2016 Source: Billings Association of Realtors.
Housing Price Increases Since 2000 Closely Track Economic Growth Housing Price Index by Zip Code, 2015 Index, 2000 = 100
Strong Housing Price Growth Over the Last Four Years Percent Growth in Housing Price Index by Zip Code Since 2012 Miles City, 18.0% Sidney, 20.7% Glendive, 24.4% Source: Federal Home Finance Agency
Strongest Price Growth in North Central Montana is in Conrad Percent Growth in Housing Price Index by Zip Code Since 2012 Conrad, 22.8% Great Falls, 7.6% Source: Federal Home Finance Agency
Strongest Price Growth in Northwestern Montana is in Sommers Percent Growth in Housing Price Index by Zip Code Since 2012 Kalispell, 14.9% Columbia Falls, 18.9% Sommers, 24.1% Source: Federal Home Finance Agency
Strongest Price Growth in Bozeman is West of City Percent Growth in Housing Price Index by Zip Code Since 2012 Three Forks, 33.7% Belgrade, 29.8% Manhattan, 30.4% Source: Federal Home Finance Agency
Strongest Price Growth in the Missoula area is in the City Percent Growth in Housing Price Index by Zip Code Since 2012 Missoula 59801, 11.9% Corvallis, 10.4% Source: Federal Home Finance Agency
Strongest Price Growth in the Billings area is in Billings Heights Percent Growth in Housing Price Index by Zip Code Since 2012 Billings Heights, 14.1% Livingston, 18.9% Source: Federal Home Finance Agency
Bozeman in 1940
Bozeman in 1980s
Bozeman in 2000s
Residential Building Activity Shifts West Single Family Housing Starts, 2015 Source: Bureau of Business and Economic Research
Home Building Far Off Peak Levels of 2005 in West Single Family Housing Starts in 2015 as a Percent of 2005 Source: Bureau of Business and Economic Research
Single Family Housing Starts, Richland County vs. Montana Index, 2001 = 100 Percent 140 120 100 80 60 40 Montana 20 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Bureau of Business and Economic Research and U.S. Census Bureau
Single Family Housing Starts, Richland County vs. Montana Index, 2001 = 100 Percent 1600 1400 1200 1000 Richland 800 600 400 200 0 Montana 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Bureau of Business and Economic Research and U.S. Census Bureau
Single Family Housing Starts, Custer County vs. Montana Index, 2001 = 100 Percent 200 180 160 140 120 100 80 60 40 20 0 Montana Custer 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Bureau of Business and Economic Research and U.S. Census Bureau
Single Family Housing Starts, Cascade County vs. Montana Index, 2001 = 100 Percent 180 160 140 120 100 Montana 80 60 40 Cascade 20 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Bureau of Business and Economic Research and U.S. Census Bureau
Single Family Housing Starts, Flathead County vs. Montana Index, 2001 = 100 Percent 180 160 140 120 100 80 60 40 20 0 Montana Flathead 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Bureau of Business and Economic Research and U.S. Census Bureau
Single Family Housing Starts, Gallatin County vs. Montana Index, 2001 = 100 Percent 160 140 120 100 80 60 40 20 Montana Gallatin 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Bureau of Business and Economic Research and U.S. Census Bureau
Single Family Housing Starts, Missoula County vs. Montana Index, 2001 = 100 Percent 180 160 140 120 Montana 100 80 60 40 20 0 Missoula 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Bureau of Business and Economic Research and U.S. Census Bureau
Single Family Housing Starts, Ravalli County vs. Montana Index, 2001 = 100 Percent 140 120 100 Montana 80 60 40 20 0 Ravalli 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Bureau of Business and Economic Research and U.S. Census Bureau
Single Family Housing Starts, Yellowstone County vs. Montana Index, 2001 = 100 Percent 140 120 Yellowstone 100 80 Montana 60 40 20 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Bureau of Business and Economic Research and U.S. Census Bureau
Mortgage Risk Has Risen Since 2013, Especially in the U.S. AEI Mortgage Risk Index 13% 12% U.S. 11% Montana 10% 9% 8% 2012 2013 2014 2015 2016 Source: American Enterprise Institute
Mortgage Originations Not Growing as Fast as U.S. Average New Mortgages, U.S. and Montana, Index 2013Q2 = 100 140 130 U.S. 120 110 Montana 100 90 80 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 2012 2013 2014 2015 2016 Source: American Enterprise Institute
Markets in 2017 and Beyond Federal support of homeownership remains as strong as ever Impact of late 2016 increases in mortgage rates already being felt Stage set for another strong performance in Montana markets Development patterns, low construction rates will fuel more price growth Demographic trends, low rates of home building support medium term forecast of construction breakout
Is Montana Running Out of Workers? Talent is always in short supply Construction and Health Care are two pressure points Straight line forecasts are misleading Migration, technology and wage adjustments will be part of the solution
Percent 5.8% 5.6% U.S. Construction Employment Share is Low in Comparison With History 5.4% 5.2% ~ 500,000 jobs 5.0% 4.8% 4.6% 4.4% 4.2% 4.0% 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 U.S. Construction Employment as a Percentage of Total Employment Source: U.S. Bureau of Labor Statistics
Construction Unemployment Rates Near an All Time Low Percent 30 25 20 15 10 5 0 2001 2003 2005 2007 2009 2011 2013 2015 U.S. Unemployment Rate, Construction Industry, Percent, Not Seasonally Adjusted Source: U.S. Bureau of Labor Statistics
Percent 16 14 12 10 8 6 4 2 Construction Workforce Remains Male Dominated 0 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 U.S. Ratio of Women Employees to All Employees, Construction, Percent, Seasonally Adjusted Source: U.S. Bureau of Labor Statistics
Thousands Pool of Unemployed Men Aged 55 and Under is Shrinking 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 1995 2000 2005 2010 2015 U.S. Unemployed Males Aged 55 and Younger, Thousands Source: U.S. Bureau of Labor Statistics ~ 500,000 people
Connecting the Dots Slack does not exist to add 500,000 more construction jobs All of the available male workforce 55 and under would have to go into construction (an impossible outcome) for this to occur Construction employers will bid away workers from other industries over time (e.g., manufacturing, agriculture) Workers will migrate from slower growing regions to the south and west Foreign immigration has historically been important (28 percent of construction workers are Hispanic) Rising construction costs may choke off some growth
Questions?