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From Recovery to Expansion, Economic Outlook Keeps Brightening
Flathead’s economy picked up steam last year, spurring hopes that the momentum will continue into 2014
A builder takes measurements as he frames a house in Silverbrook Estates in Kalispell. - Greg Lindstrom | Flathead Beacon
Flathead County’s economy appears to be transitioning from recovery to expansion, fueled by employment growth along with increasing demand for real estate, generating an optimistic forecast for continued improvement this year.

Based on third quarter jobs figures, the county’s overall labor market grew by an estimated 3 percent in 2013, the most since before the Great Recession, according to economist Brad Eldredge.

As construction, health care and real estate sectors make strong gains in the local economy, the momentum should keep pace this year, Eldredge said, although uncertainty within the national economy could create a headwind. Taking a conservative outlook, he predicted another 2.7 percent growth in the Flathead labor market in 2014.

“Confidence is increasing and improving. That bodes well,” he said. “This recovery really has legs.”

Eldredge presented the latest jobs figures from 2013 at last week’s 12th annual Flathead Valley Economic Forecast banquet at FVCC, organized by Montana West Economic Development and Flathead County Economic Development Authority.

The event marked the third year in a row that presenters touted the progress of a local economy that took a battering during the recession, losing more than 5,000 jobs between 2008 and 2010 while the housing market suffered greatly.

But Eldredge’s report, presented alongside an analysis on the rebounding real estate market, provide evidence of a clear shift in a positive direction.

“There’s a lot more good news than bad news,” he said.

Job Figures Reflect Improving Economic Health
Last year there was an average of 40,182 workers in Flathead County, 419 more than 2012 and 1,432 more than 2011, according to Jim Kelley, a real estate appraiser who closely tracks economic data in the Flathead.

Though the job figures from 2013 were still 3,911 shy of the all-time high in 2007, the expanded labor force reflects an economy growing increasingly healthy and gaining momentum after bottoming out in 2011, Kelley stated in his year-end report.

Eldredge echoed Kelley’s sentiments last week when he presented the latest data from the U.S. Bureau of Labor Statistics.

The construction industry saw roughly 320 more jobs last summer than the previous year, representing a 12.5 percent growth.

Educational positions, like teachers and other school staff, jumped by nearly 250, spurred by successful levies and bonds passed in 2013.

The county’s largest employment sector, the health care industry, added more than 200 jobs. Though the impacts of the Affordable Care Act remain uncertain, Eldredge described the health care industry as an “unstoppable juggernaut” that remains consistent.

Manufacturing, which includes timber companies, added more than 100 jobs, resulting in “some exciting growth,” Eldredge said.

“Wood products, the traditional big player in manufacturing, has stabilized and is even growing pretty impressively in some areas,” he said.

After stagnating during the past five years, overall wages increased 3.6 percent in the county last year, Eldredge said.

“Wages are increasing at a really healthy pace here in the valley. Flathead County workers on average were seeing real wage gains. That’s what you want,” he said, noting that the trend will benefit from workers and businesses increasing productivity and skills within the labor force, thus increasing value.

Eldredge acknowledged there are risks on the horizon that could stymie economic growth, including the ramifications of sweeping health care reform and the Federal Reserve’s tapering stimulus support.

He stopped short of predicting any specific industry gains for 2014 and acknowledged that his forecast from a year ago of 2 percent was thankfully lower than the reality. Looking ahead, he projected a positive tone for the Flathead’s future.

“It’s still a great place to work and live,” he said. “As long as we maintain that quality of life, we will attract people to move our economy forward in the valley.”

Click to enlarge graphic

The Rising Real Estate Market
The number of commercial and residential property sales in 2013 increased largely over 2012. New home construction saw modest gains, while foreclosures dropped yet again.

All together, it amounted to the best year in the county’s overall real estate market since 2007, according to local appraisers Ellie Clark and Barbra Bennett, who gave a “Past, Present and Future” presentation on real estate in the Flathead at last week’s event, drawing data from Kelley’s report.

Home sales jumped 15.5 percent across the county last year, led by the two largest sub-markets, Kalispell and Whitefish. Of the 1,539 home sales in the county, there were 385 sold in Kalispell, the most in 10 years, according to figures from the Northwest Montana Association of Realtors. The median sales price was up 10 percent over 2012, helped largely by the decreasing amount of foreclosures and bank-owned properties.

Countywide, 15 percent of the homes for sale last year were foreclosures, which was roughly 15 percent fewer than last year. That trend appears to be staying in the right direction, according to Kelley.

Whitefish also had the most sales in a decade and the median price was up 7.5 percent.

The number of home sales in Columbia Falls dropped slightly from last year with 51 in 2013, but remained near the 10-year average of 55-60 and represents a slow recovery, Kelley stated in his report. The median sales price was still up 23 percent.

Luxury homes, identified as properties valued above $1 million, saw the most sales since 2007, when nearly 60 were bought and sold in the county. Last year there were nearly 40, while the median price was up 9 percent.

Commercial property had the most sales since 2007 and the number of real-estate owned, or REO, sales decreased, which points to an improving commercial market, Kelley stated in his report. The median sales price jumped 26 percent from 2012. Lease rates did not see a noticeable gain, though.

The rise of construction jobs last year can be closely tied to the hike in new homes built across the valley.

In Kalispell, crews built 106 single-family residences and 18 townhouses. In 2012, there were 98 total homes. The single-family homes in 2013 were the most since 2007, when builders constructed 146 new homes.

Whitefish reported 75 single-family residences, six duplexes and townhouses.

Columbia Falls reported eight new single-family homes, six townhouses and two multi-family units.

Flathead County does not issue building permits, and the next best estimate is the number of septic permits, according to Kelley. In 2013, there were 301 final septic inspections, 325 written permits and 419 applications. All three numbers grew for the third year in a row and were the highest since 2009.

Subdivision activity remains near its all-time low, Kelley stated, but as the inventory of bank-owned and low-priced lots goes away, there could be new interest in development.

To read Kelley’s full report, visit www.kelleyappraisal.net.
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