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Home Construction

New single-family home construction, like this house in the Rattlesnake Valley, is down at least 60 percent from pre-recession numbers in almost every major market in Montana. 

Patrick Barkey hears stories he doesn't want to.

Construction companies taking jobs that don't turn a profit simply in an effort to hold onto their best employees during difficult times. More and more Montana construction workers are leaving to seek jobs in the oil fields of North Dakota.

"The construction industry is feeling a lot of pain," says Barkey, director of the University of Montana Bureau of Business and Economic Research.

And the forecast isn't good.

In an article he wrote for the latest Montana Business Quarterly, Barkey estimated it will be two more years before Montana will see anything resembling a healthy demand for new housing.

"It's a bit of a downer, no question about it," Barkey says. "I'm not rooting for this one to come true, but right now, the way it's looking, it's hard to see the construction industry turning the corner for a while."

The prediction, ironically, came in an article entitled "Montana Outlook: Stronger Growth Ahead."

Many other parts of the state's economy, Barkey reported, saw a return to normalcy last year and are showing respectable growth this year.

"Housing is the biggest exception," he says.

His prediction is based on the fact that new single-family home construction is down at least 60 percent from pre-recession numbers in every major market in Montana except for Helena and Butte.

They're both down, too, just not as much.

Some of the numbers are staggering: Missoula County, down 60.4 percent from 2007 to 2009; Yellowstone County, down 61.3 percent; Cascade, down 64 percent; Ravalli down 64.3; Flathead, down 67; Gallatin, down 69.

In Missoula, Barkey says new housing starts went from 523 in 2007, to 207 in 2009.

Helena, which has a different type of economy than the other cities because it is home to state government, was down 19.4 percent. It's tougher to explain why Butte and Silver Bow County's decline - 25.4 percent - isn't as high as other areas, Barkey says.

"But one thing is absolutely true," he adds. "Construction has been flattened everywhere. It's just that a couple of places aren't as big."

In the case of housing, Barkey says low sales, falling prices and foreclosures are both symptoms of, and cause of, poor market conditions.

"Falling prices knock out any type of spec investment," he adds. "Homebuilding won't take off until prices stabilize. With prices in 2010 averaging 3 percent lower than year-ago levels, that day has not arrived yet."

Construction companies are scrambling to survive the downturn, according to Barkey. Ones that only did big projects are now taking on smaller ones, ones that specialized in residential have branched out into commercial, ones that never left town for a job are traveling farther.

He predicts it will be 2013 before housing construction sees respectable growth, and 2014 before it returns to the pre-recession levels of 2007.

"I don't think it will fall any further" in the meantime, Barkey says, "but you can see how far it's fallen already."

It's the weak spot in an otherwise strengthening state economy, Barkey said in his article.

Starting with the second half of 2011 and continuing into next year, Montana's economy will see its best days since 2006, he predicted.

Among the reasons:

  • Continued and expanded investment in the state's energy and natural resources infrastructure.
  • Strong growth in farm receipts because of improved global market conditions.
  • Growth in exports fueled by a weaker dollar.
  • Continued improvement in consumer spending in the national economy.

Reporter Vince Devlin can be reached at (406) 319-2117 or at vdevlin@missoulian.com.

 

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