Flathead Forecast: Real-estate, job outlook still not good

There were few moments of optimism at the annual Flathead Economic Forecast forum on Wednesday as industry experts presented a somewhat grim progress report on real-estate and job outlooks for the coming year.

More than 200 members of the business community crowded the presentation hall at Flathead Valley Community College for the event co-sponsored by Montana West Economic Development and the FVCC, eager to hear encouraging news about a rebounding local economy. Instead they learned the housing industry is in its biggest slump in four decades.

“It’s good we’re on the first floor; there are no windows to jump out of,” Brad Eldredge said tongue-in-cheek as he began his speech on the labor-force outlook for Flathead County.

Eldredge, director of Institutional Research, Assessment and Planning at FVCC,  underscored the loss of jobs between 2008’s fiscal second quarter and that of 2009, stating a 9.5 percent decrease in Flathead County, nearly double the 4.8 percent national figure. Construction and manufacturing trades took the brunt of the downturn, losing some 2,000 positions.

Blue-collar workers are going back to school in droves, he said, noting a 40 percent increase in enrollment at FVCC for spring 2010 semester over the same semester last year.

“People are looking to retrain. They aren’t sitting around waiting for the next housing boom and I don’t think they can,” he said. “I don’t think we’re going to have another housing boom.”

Eldredge said economists at the Minneapolis region of the Federal Reserve predict Montana will see a 3.3 percent increase in employment this year.

“Even with that increase, it won’t be enough to counter the unemployment rate,” Eldredge said.

Because the Flathead County unemployment rate exceeds the state average, it will take a significantly longer period of time to return to pre-recession employment quotas, possibly through 2011 or beyond.

The 2009 federal stimulus program did help the local economy but it’s yet to be determined whether the resulting inflation, weak dollar value and long-term interest rates will render it effective or not in the long run.

In an Associated Press report released Tuesday, the new Congressional Budget Office estimate adds an additional $75 billion to the $787 billion already spent on last year’s economic stimulus bill. With that figure, the stimulus is expected to add about $400 billion to the national deficit — already projected at $1.35 trillion dollars — eliminating much of the estimated savings projected for President Barack Obama’s proposed spending freeze.

“As the stimulus gets larger, the risks go up and that offsets the benefit you get from the stimulus,” Eldredge maintained.

Jim Kelley, a real-estate appraiser operates Kelley Appraisal, spoke of the diminishing amount of new construction going on in the valley. Kelley referenced data dating back to 1969, the last year the county had fewer than 400 new houses started.

“We’re certainly at a lull here,” he said.

According to his statistics, new construction in 2009 for Flathead County was down 36.5 percent from 2008, which themselves were down 34.4 percent from 2007.

Single-family residence construction in Kalispell alone in 2009 was barely a third of what it was two years ago when the housing surge peaked.

That housing bubble was painfully clear in the graphs Kelley presented (and which are available at kelleyappraisal.net and also at Insty Prints in Kalispell).

One graph depicted the growth of household affordability versus median housing sales price. With statistics beginning in 1984, the median price mostly overlapped and equaled the affordability index as it steadily rose until roughly 2004, when median price skyrocketed, surpassing affordability by nearly $70,000 per home in 2007. Due to the housing crisis, median prices largely realigned themselves with the index in 2009.

“Can you afford a house that’s 5.5 times your income?” Kelley asked, referring to the median price skew at the height of the bubble.

Kelley expects the number of foreclosures to increase in 2010 and new-home construction to decrease in answer to the yet-faltering economy. He said he sees no remedy to the shrinking market without a new population surge.

Marney McCleary, director of housing for Community Action Partnership, closed the seminar with a progress report on her agency’s efforts to create a land trust that will rehabilitate 22 foreclosed properties and offer them as affordable housing to the Flathead community.

Funded by the Housing and Economic Recovery Act of 2008 — a program designed to stabilize communities hit hard by foreclosures — the Neighborhood Stabilization Program looks to develop permanently affordable homeownership in the Flathead Valley. McCleary stressed that both the land trust and homeowners will pay taxes to the city and state.

Community Action Partnership will host four informational sessions on the land trust and pending housing availability as early as mid-April. Questions on the issue should be directed to CAP.

All three presenters’ reports will be available on the Montana West Economic Development Web site, www.dobusinessinmontana.com.

Reporter Erika Hoefer may be reached at 758-4439 or by e-mail at ehoefer@dailyinterlake.com