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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?
Real Estate and Construction
• 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
Real Estate and Construction
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
Real Estate and Construction
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
Real Estate and Construction
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
Real Estate and Construction
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
Number of Sales Median Sale Price Days on Market
2/19/2020
4
800
1,000
1,200
1,400
1,600
1,800
200000
240000
280000
320000
360000
400000
440000
121314151617181970
Real Estate and Construction
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
Number of Sales Median Sale Price Days on Market
400
600
800
1,000
$150,000
$190,000
$230,000
$270,000
14 15 16 17 18 1990
Real Estate and Construction
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
Source: Montana Regional MLS.
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
Real Estate and Construction
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
Source: Montana Regional MLS.
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
Real Estate and Construction
14 15 16 17 18 19
Market Continues to Heat UpRavalli County Market Statistics for Single Family Homes
Number of Sales Median Sale Price Days on Market
Source: Montana Regional MLS.
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.
Real Estate and Construction
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
Real Estate and Construction
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
Real Estate and Construction
Source: Montana Department of Revenue.
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
Real Estate and Construction
Source: Montana Department of Revenue.
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
Real Estate and Construction
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
Real Estate and Construction
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
Source: Zillow Real Estate Research
Missoula County HPI Since 2008 by Market SegmentPrice Index 1402008 = 100
130Low-tier premium:$23k
2008
Real Estate and Construction
2009 2010 2011 2012 2013 2014 2015
High Tier
2016 2017 2018 2019
110
100
90
80
120
Low Tier High Tier
Source: Zillow Real Estate Research
Yellowstone County HPI Since 2008 by Market SegmentPrice Index 1402008 = 100
130
Low-tierpremium:$28k
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Real Estate and Construction
2/19/2020
10
130
120
110
100
90
80
70
140
Low Tier High Tier
Source: Zillow Real Estate Research
Gallatin County HPI Since 2008 by Market SegmentPrice Index 1502008 = 100
Low-tierpremium:$51k
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Real Estate and Construction
120
110
100
90
80
70
130
Low Tier High Tier
Source: Zillow Real Estate Research
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
Real Estate and Construction
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
Real Estate and Construction
Median Price-to-Income Ratio for Entry-Level Homes
Source: American Enterprise Institute
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
Real Estate and Construction
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
Real Estate and Construction
Per
cent
age
ofH
ouse
hold
s
Source: U.S. Census Bureau.
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
Real Estate and Construction
Source: U.S. Census Bureau.
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
Real Estate and Construction
Source: U.S. Census Bureau.
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
Real Estate and Construction
Source: U.S. Census Bureau.
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
Real Estate and Construction
Source: U.S. Census Bureau.
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
Real Estate and Construction
Source: U.S. Census Bureau.
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
Real Estate and Construction
Source: U.S. Census Bureau.
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
Real Estate and Construction
Source: U.S. Census Bureau.
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
Real Estate and Construction
New Home Construction Leveling OffHousing Permits, Montana
1,000
0
Real Estate and Construction
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
Real Estate and Construction
New Construction by Market Segment: Cascade County
Source: American Enterprise Institute
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
Real Estate and Construction
Source: American Enterprise Institute
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
Real Estate and Construction
Source: American Enterprise Institute
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
Real Estate and Construction
Source: American Enterprise Institute
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
Real Estate and Construction
Source: American Enterprise Institute
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
Real Estate and Construction
Source: American Enterprise Institute
2/19/2020
20
Looking Ahead to 2020
Real Estate and Construction
• 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
Real Estate and Construction
2/19/2020
21
Outlook for 2020
Real Estate and Construction
• 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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