Outlook for Real Estate · • Housing prices exceeded their pre-recession peaks two years ago •...
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The Outlook for Real Estate and Residential Construction Patrick M. Barkey, Director Bureau of Business and Economic Research University of Montana
Transcript of Outlook for Real Estate · • Housing prices exceeded their pre-recession peaks two years ago •...
The Outlook for Real Estate and Residential ConstructionPatrick M. Barkey, DirectorBureau of Business and Economic ResearchUniversity 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
100
120
140
160
180
200
220
240
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Inflation-Corrected
Source: Federal Housing Finance Agency, Bureau of Economic Analysis
FHFA Housing Price Index, U.S., 1995=100Index, 1995=100
Montana’s Housing Price Recovery Occurred Two Years Ago
100
120
140
160
180
200
220
240
260
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Inflation-Corrected
Source: Federal Housing Finance Agency, Bureau of Economic Analysis
FHFA Housing Price Index, Montana, 1995=100Index, 1995=100
Growth in Rents Has Increased Since 2011
$450
$500
$550
$600
$650
$700
$750
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: U.S. Census Bureau.Montana Residential Rent, Inflation Adjusted (2014$)
3.5 % per year -.1% per year
5.4 % per year
Boom, Bust, and Recovery of Montana Real Estate
100
110
120
130
140
150
160
170
180
190
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Housing Prices
Montana Housing Price Index and Montana Median Household Income Index, 2001 = 100
Source: U.S. Federal Housing Finance Agency and Census Bureau.
Median Household Income
Percent
Will the Erosion of Homeownership Rates Continue?
62%
64%
66%
68%
70%
72%
74%
76%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: U.S. Census Bureau
Percent
Montana
U.S.
Sales Volumes and Median Prices Up Strongly Since 2012
0
10
20
30
40
50
60
70
80
Cascade Flathead Gallatin Lewis &Clark
Missoula Silver Bow Yellowstone
Sales Median Price
Percent
Source: Montana Department of Revenue
Sales Volumes Plunge Since 2012 Reflect Oil Bust in East
‐40
‐30
‐20
‐10
0
10
20
30
Custer RichlandSales Median Price
Percent
Source: Montana Department of Revenue
Markets Looking Much Healthier
700
750
800
850
900
950
1,000
2011 2012 2013 2014 2015 2016
Number of Sales
$140,000
$150,000
$160,000
$170,000
$180,000
2011 2012 2013 2014 2015 2016
Median Sale Price
35
45
55
65
75
85
95
105
115
125
135
145
2011 2012 2013 2014 2015 2016
Days on Market
Source: Great Falls Association of Realtors.
Cascade County Market Statistics
Market Has Been Transformed Since 2010
0
20
40
60
80
100
120
140
160
180
2010 2011 2012 2013 2014 2015
Number of Sales
$0
$50,000
$100,000
$150,000
$200,000
$250,000
2010 2011 2012 2013 2014 2015
Median Sale Price
Source: Montana Department of Revenue.
Richland County Market Statistics
Little Change in Market Activity
0
50
100
150
200
250
2010 2011 2012 2013 2014 2015
Number of Sales
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
2010 2011 2012 2013 2014 2015
Median Sale Price
Source: Montana Department of Revenue.
Custer County Market Statistics
Markets Looking Much Healthier
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2010 2011 2012 2013 2014 2015
Number of Sales
$180,000
$190,000
$200,000
$210,000
$220,000
$230,000
$240,000
$250,000
2010 2011 2012 2013 2014 2015
Median Sale Price
Source: Montana Department of Revenue.
Flathead County Market Statistics
Market Continues to Heat Up
600
800
1,000
1,200
1,400
1,600
10 11 12 13 14 15 16
Number of Sales
$220,000
$245,000
$270,000
$295,000
$320,000
$345,000
$370,000
10 11 12 13 14 15 16
Median Sale Price
70
80
90
100
110
120
2010 2011 2012 2013 2014 2015 2016
Days on Market
Source: Gallatin Association of Realtors.
Gallatin County Market Statistics for Single Family Homes
Sale Price Growth
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2010 2011 2012 2013 2014 2015
Number of Sales
$190,000
$200,000
$210,000
$220,000
$230,000
$240,000
$250,000
2010 2011 2012 2013 2014 2015
Median Sale Price
Source: Montana Department of Revenue.
Missoula County Market Statistics
Markets Looking Much Healthier
150
200
250
300
350
400
450
500
550
600
2010 2011 2012 2013 2014 2015
Number of Sales
$190,000
$200,000
$210,000
$220,000
$230,000
$240,000
2010 2011 2012 2013 2014 2015
Median Sale Price
Source: Montana Department of Revenue.
Ravalli County Market Statistics
Markets Cooled Slightly in 2016
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400
2,600
11 12 13 14 15 16
Number of Sales
$175,000
$180,000
$185,000
$190,000
$195,000
$200,000
$205,000
$210,000
$215,000
$220,000
11 12 13 14 15 16
Median Sale Price
35
45
55
65
75
85
2011 2012 2013 2014 2015 2016
Days on Market
Source: Billings Association of Realtors.
Yellowstone County Market Statistics for Single Family Homes
Housing Price Increases Since 2000 Closely Track Economic GrowthHousing Price Index by Zip Code, 2015 – Index, 2000 = 100
Strong Housing Price Growth Over the Last Four YearsPercent Growth in Housing Price Index by Zip Code Since 2012
Source: Federal Home Finance Agency
Sidney, 20.7%Miles City, 18.0%
Glendive, 24.4%
Strongest Price Growth in North Central Montana is in ConradPercent Growth in Housing Price Index by Zip Code Since 2012
Source: Federal Home Finance Agency
Conrad, 22.8% Great Falls, 7.6%
Strongest Price Growth in Northwestern Montana is in SommersPercent Growth in Housing Price Index by Zip Code Since 2012
Source: Federal Home Finance Agency
Kalispell, 14.9%
Sommers, 24.1%
Columbia Falls, 18.9%
Strongest Price Growth in Bozeman is West of CityPercent 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 CityPercent Growth in Housing Price Index by Zip Code Since 2012
Source: Federal Home Finance Agency
Missoula 59801, 11.9%
Corvallis, 10.4%
Strongest Price Growth in the Billings area is in Billings HeightsPercent Growth in Housing Price Index by Zip Code Since 2012
Source: Federal Home Finance AgencyLivingston, 18.9%
Billings Heights, 14.1%
Bozeman in 1940
Bozeman in 1980s
Bozeman in 2000s
Residential Building Activity Shifts WestSingle Family Housing Starts, 2015
Source: Bureau of Business and Economic Research
Home Building Far Off Peak Levels of 2005 in WestSingle Family Housing Starts in 2015 as a Percent of 2005
Source: Bureau of Business and Economic Research
Single Family Housing Starts, Richland County vs. MontanaIndex, 2001 = 100
0
20
40
60
80
100
120
140
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Montana
Source: Bureau of Business and Economic Research and U.S. Census Bureau
Percent
Single Family Housing Starts, Richland County vs. MontanaIndex, 2001 = 100
0
200
400
600
800
1000
1200
1400
1600
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Montana
Source: Bureau of Business and Economic Research and U.S. Census Bureau
Percent
Richland
Single Family Housing Starts, Custer County vs. MontanaIndex, 2001 = 100
0
20
40
60
80
100
120
140
160
180
200
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Montana
Source: Bureau of Business and Economic Research and U.S. Census Bureau
Percent
Custer
Single Family Housing Starts, Cascade County vs. MontanaIndex, 2001 = 100
0
20
40
60
80
100
120
140
160
180
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Montana
Source: Bureau of Business and Economic Research and U.S. Census Bureau
Percent
Cascade
Single Family Housing Starts, Flathead County vs. MontanaIndex, 2001 = 100
0
20
40
60
80
100
120
140
160
180
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Montana
Source: Bureau of Business and Economic Research and U.S. Census Bureau
Percent
Flathead
Single Family Housing Starts, Gallatin County vs. MontanaIndex, 2001 = 100
0
20
40
60
80
100
120
140
160
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Montana
Source: Bureau of Business and Economic Research and U.S. Census Bureau
Percent
Gallatin
Single Family Housing Starts, Missoula County vs. MontanaIndex, 2001 = 100
0
20
40
60
80
100
120
140
160
180
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Montana
Source: Bureau of Business and Economic Research and U.S. Census Bureau
Percent
Missoula
Single Family Housing Starts, Ravalli County vs. MontanaIndex, 2001 = 100
0
20
40
60
80
100
120
140
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Montana
Source: Bureau of Business and Economic Research and U.S. Census Bureau
Percent
Ravalli
Single Family Housing Starts, Yellowstone County vs. MontanaIndex, 2001 = 100
0
20
40
60
80
100
120
140
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Montana
Source: Bureau of Business and Economic Research and U.S. Census Bureau
Percent
Yellowstone
Mortgage Risk Has Risen Since 2013, Especially in the U.S.
8%
9%
10%
11%
12%
13%
2012 2013 2014 2015 2016
U.S.
Source: American Enterprise Institute
AEI Mortgage Risk Index
Montana
Mortgage Originations Not Growing as Fast as U.S. AverageNew Mortgages, U.S. and Montana, Index 2013Q2 = 100
80
90
100
110
120
130
140
4 1 2 3 4 1 2 3 4 1 2 3 4 1 22013 2014 2015 20162012
Source: American Enterprise Institute
U.S.
Montana
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
U.S. Construction Employment Share is Low in Comparison With History
4.0%
4.2%
4.4%
4.6%
4.8%
5.0%
5.2%
5.4%
5.6%
5.8%
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
~ 500,000 jobs
U.S. Construction Employment as a Percentage of Total EmploymentSource: U.S. Bureau of Labor Statistics
Percent
Construction Unemployment Rates Near an All Time Low
0
5
10
15
20
25
30
2001 2003 2005 2007 2009 2011 2013 2015
U.S. Unemployment Rate, Construction Industry, Percent, Not Seasonally AdjustedSource: U.S. Bureau of Labor Statistics
Percent
Construction Workforce Remains Male Dominated
0
2
4
6
8
10
12
14
16
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
U.S. Ratio of Women Employees to All Employees, Construction, Percent, Seasonally AdjustedSource: U.S. Bureau of Labor Statistics
Percent
Pool of Unemployed Men Aged 55 and Under is Shrinking
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
1995 2000 2005 2010 2015
U.S. Unemployed Males Aged 55 and Younger, ThousandsSource: U.S. Bureau of Labor Statistics
~ 500,000 people
Thousands
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?
