the outlook for real estate and construction · the outlook for real estate and construction real...

2/19/2020

1

The Outlook for Real Estate and Construction

Real Estate and Construction

Brandon BridgeEconomist and Director of Forecasting

Bureau of Business and Economic ResearchUniversity of Montana

Presentation given at 2020 MT Economic Outlook Seminar Helena, MTJanuary 28, 2020

Reasons for Optimism?


• Strong volumes nationally

• Steady price increases

• Mortgage risk subsiding

• Positive industry sentiment

• 2018 volumes down

• 2019 volumes looking stronger

• Bifurcated market

• Affordability getting worse

• Tight inventories

2/19/2020

2

180


260

240

220

200

280

300

160

140

120

10000 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Source: Federal Housing FinanceAgency

Strong Housing Price Growth Since 2011FHFA Housing Price Index, U.S., 1995=100

Montana

United States

National Price Growth Not Evenly Distributed Across Price Tiers


Source: AEI Center on Housing Markets andFinance

2/19/2020

3

700

800

900

1,000

1,100

1,200$210,000

$200,000

$190,000

$180,000

$170,000

$160,000

$150,000

$140,000

$130,00012 14 16 18

80


90

100

110

120

130

140

12 13 14 15 16 17 18 19

Number of Sales Median Sale Price Days on Market

12 13 14 1516 17 1819

Source: Great Falls Association ofRealtors.

Markets Looking Much HealthierCascade County Market Statistics for Single Family Homes

2,100

2,000

1,900

1,800

1,700

1,600

1,500

1,400

1,300

1,200

1,100

$350,000

$330,000

$310,000

$290,000

$270,000

$250,000

$230,000

$210,000

$190,000

$170,000

$150,000

$130,00012 14 16 18

225215205195185175165155145135125115105

95


12 13 14 15 16 17 18 191213 14 1516 17 1819

Source: Montana Regional MLS.

Markets Remaining StrongFlathead County Market Statistics for Single Family Homes


2/19/2020

4

800

1,000

1,200

1,400

1,600

1,800

200000

240000

280000

320000

360000

400000

440000

121314151617181970


80

90

100

110

12 13 14 15 16 17 18 1912 13 1415 16 1718 19

Source: Gallatin Association ofRealtors.

Market Continues to Heat UpGallatin County Market Statistics for Single Family Homes


400

600

800

1,000

$150,000

$190,000

$230,000

$270,000

14 15 16 17 18 1990


100

110

120

130

14 15 16 17 18 19

Market Price IncreasingLewis & Clark County Market Statistics for Single Family Homes

Number of Sales Median Sale Price Days on Market$310,000 140

14 15 16 17 18 19


2/19/2020

5

280

480

680

880

1,080

1,280

1,480

$180,000

$220,000

$260,000

$300,000

$340,000

14 15 16 17 18 1990


100

110

120

14 15 16 17 18 19

Market Continues to Heat UpMissoula County Market Statistics for Single Family Homes

Number of Sales Median Sale Price Days on Market130

14 15 16 17 18 19


280

480

680

14 15 16 17 18 19$180,000

$220,000

$260,000

$300,000

$340,000

14 15 16 17 18 19

200

190

180

170

160

150

140

130

120

110


14 15 16 17 18 19

Market Continues to Heat UpRavalli County Market Statistics for Single Family Homes



2/19/2020

6

550525500475450425400375350325300275

$130,000

$120,000

$110,000

$100,000

$90,000

$140,000

$150,000

$160,000

Source: Montana Department of Revenue.


Silver Bow County Market Statistics

Number of Sales Median Sale Price

Markets Looking Healthier

2,6002,4002,2002,0001,8001,6001,4001,2001,000

800600

Number of Sales

$140,000

$160,000

$180,000

$200,000

$220,000

$240,000

$260,000

Median Sale Price


Source: Montana Department of Revenue

Sale Price GrowthYellowstone County Market Statistics

2/19/2020

7

70

90

110

130

150

170

190Number of Sales

$50,000

$70,000

$90,000

$110,000

$130,000

$150,000

Median Sale Price



Volumes RisingFergus County Market Statistics

160

140

120

100

80

60

40

20

Number of Sales

$70,000

$90,000

$110,000

$130,000

$150,000

$170,000

Median Sale Price



Markets Looking HealthierHill County Market Statistics

2/19/2020

8

39%

52%

41%37%

33%29%

31% 29%28%

44%

32%30%

26%22% 23%22% 22%21%

20%

10%

0%

30%

40%

50%

60%

Entry-level Move-up


Source: American Enterprise Institute

Home Price Appreciation Since 2012 by Market Segment

120

110

100

90

80

70

130

140

Low Tier

Lewis and Clark County HPI Since 2008 by Market Segment

2008 2009 2010 2011 2012 2013 2014 2015

High Tier

2016 2017 2018 2019

Low-tierpremium:$21k

Source: Zillow Real Estate Research

Price Index 2008 = 100


2/19/2020

9

110

100

90

80

70

120

2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 20 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 00 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 18 8 8 8 9 9 9 9 0 0 0 0 1 1 1 1 2 2 2 2 3 3 3 3 4 4 4 4 5 5 5 5 6 6 6 6 7 7 7 7 8 8 8 8 9 9 9 9-0 -0 -0 -1 -0 -0 -0 -1 -0 -0 -0 -1 -0 -0 -0 -1 -0 -0 -0 -1 -0 -0 -0 -1 -0 -0 -0 -1 -0 -0 -0 -1 -0 -0 -0 -1 -0 -0 -0 -1 -0 -0 -0 -1 -0 -0 -0 -11 4 7 0 1 4 7 0 1 4 7 0 1 4 7 0 1 4 7 0 1 4 7 0 1 4 7 0 1 4 7 0 1 4 7 0 1 4 7 0 1 4 7 0 1 4 7 0

Low Tier


Missoula County HPI Since 2008 by Market SegmentPrice Index 1402008 = 100

130Low-tier premium:$23k

2008


2009 2010 2011 2012 2013 2014 2015

High Tier

2016 2017 2018 2019

110

100

90

80

120

Low Tier High Tier


Yellowstone County HPI Since 2008 by Market SegmentPrice Index 1402008 = 100

130


2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019


2/19/2020

10

130

120

110

100

90

80

70

140

Low Tier High Tier


Gallatin County HPI Since 2008 by Market SegmentPrice Index 1502008 = 100


2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019


120

110

100

90

80

70

130

Low Tier High Tier


Flathead County HPI Since 2008 by Market SegmentPrice Index 1502008 = 100

140

Low-tier premium:$39k

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019


2/19/2020

11

2.7

2.4

33.1 3.1 3.1

3.3

3.6

3

2.8

3.1

3.33.4 3.4

3.6

4

2

1.5

2.5

3

3.5

4

4.5

US Silver Bow Cascade Yellowstone Gallatin Missoula FlatheadLewis &Clark

2012 2018


Median Price-to-Income Ratio for Entry-Level Homes


Percent of Households That Are Cost Burdened

42%

37%

45% 44%42%

40%38%

37% 36%

32%

22% 22%

18%

23%20%

34%

26%

19% 18%16%

50%

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

Renters Owners


Source: U.S. Census Bureau.

2/19/2020

12

3332

35 35 3535

38

36

22 2222 22

20

19

1718

15

20

25

30

35

40

2010 2011 2012 2015 2016 2017

Cascade County Cost Burdened Households

2013

Renters

2014

Owners


Per

cent

age

ofH

ouse

hold

s


Per

cent

age

ofH

ouse

hold

s

39

37

42 42

40

39

41

38

33

38 38

36

35

34

30

20

25 26

30

35

40

45

2010 2011 2012 2015 2016 2017

Flathead County Cost Burdened Households

2013

Renters

2014

Owners



2/19/2020

13

Per

cent

age

ofH

ouse

hold

s41 41

4041

4241

40

42

29

30

2827

25

2422

20

15

20

25

30

35

40

45

2010 2011 2012 2015 2016 2017

Gallatin County Cost Burdened Households

2013

Renters

2014

Owners



Per

cent

age

ofH

ouse

hold

s 3736

33

3635

32 32

2323

22 22 21

19

1716

12

17

22

27

32

37

42

38

2010 2011 2012 2015 2016 2017

Lewis & Clark County Cost Burdened Households

2013

Renters

2014

Owners



2/19/2020

14

Per

cent

age

ofH

ouse

hold

s 48 47 47 47

4445 45

44

31 3029

28

2624 24 23

15

20

25

40

35

30

45

50

55

2010 2011 2012 2015 2016 2017

Missoula County Cost Burdened Households

2013

Renters

2014

Owners



Per

cent

age

ofH

ouse

hold

s

41

39

4546

47

44

43

40

40 39

37 37

39

3435

34

25

30

35

40

45

50

2010 2011 2012 2015 2016 2017

Ravalli County Cost Burdened Households

2013

Renters

2014

Owners



2/19/2020

15

Per

cent

age

ofH

ouse

hold

s

1817 17

2010 2011 2012 2013 2014 2015 2016 2017

41 4041

39

45 4645

19 19 19 19 1815

10

35

30

25

20

40

45

55

50 48

Silver Bow County Cost Burdened Households

Renters Owners



Per

cent

age

ofH

ouse

hold

s

36 3635

3637 37

35

37

2020 20 20

19 19 19 19

10

15

20

25

30

35

40

2010 2011 2012 2015 2016 2017

Yellowstone County Cost Burdened Households

2013

Renters

2014

Owners



2/19/2020

16

Affordable Housing Units Per 100 Extreme Low Income Households

70

6358

51

3531

29

88

7873

68

53 5349

4239

20

10

0

30

40

50

60

70

80

90

100

Cascade County

Lewis and Clark County

Silver Bow County

Gallatin County

Missoula County

Ravalli County

Flathead County

2000-2004

Yellowstone County

2010-2014

Source: The Urban Institute


New Home Construction Leveling OffHousing Permits, Montana

1,000

0


2,000

4,000

3,000

5,000

8,000

7,000

6,000

9,000

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

Multi-Family

Total

Permits

10,000

Single Family

2/19/2020

17

33

64

35

58

50

36

26

42

40

51

5255

55

44

0

20

40

60

80

100

120

2012 2013 2016 2017 2018

Num

ber

ofH

omes

2014

Entry-level

2015

Move-up


New Construction by Market Segment: Cascade County


New Construction by Market Segment: Flathead County

40

99 9476 77

6150

100

234219

207222

214

121

0

50

100

150

200

250

300

350

2012 2013 2016 2017 2018

Num

ber

ofH

omes

2014

Entry-level

2015

Move-up



2/19/2020

18

New Construction by Market Segment: Gallatin County

85107

141 136 120 11768

219

341

407

484 508

579

350

0

100

200

300

400

500

600

700

800

2012 2013 2016 2017 2018

Num

ber

ofH

omes

2014

Entry-level

2015

Move-up



New Construction by Market Segment: Lewis & Clark County

36

52

3039 42

30 26

60

113

102101 99

99

56

0

20

40

60

80

100

120

140

160

180

2012 2013 2016 2017 2018

Num

ber

ofH

omes

2014

Entry-level

2015

Move-up



2/19/2020

19

New Construction by Market Segment: Missoula County

48

79

37

65 70 7362

97

122149

164168

173

117

0

50

100

150

200

300

250

2012 2013 2016 2017 2018

Nu

mb

er o

fH

om

es

2014

Entry-level

2015

Move-up



New Construction by Market Segment: Yellowstone County

529

517

428384 406 369

295

290

188 182165 169136

113

900

800

700

600

500

400

300

200

100

02012 2013 2014 2015 2016 2017 2018

Entry-level Move-up



2/19/2020

20

Looking Ahead to 2020


• Interest Rates Likely to Remain Low

Mortgage Rates Looking to Bottom Out

0.00

1.00

4.00

3.00

2.00

5.00

6.00

2016 2017 2018 2019 2020 2021

30-year mortgage

Federal Funds

Predicted

Source: IHS Markit


2/19/2020

21

Outlook for 2020


• Real estate markets in Montana will remain strong

• Low interest rates will continue to drive demand

• Affordability will get worse, particularly for entry-level homes

• Lowered market risk will boost optimism

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