New Construction to Help Ease Rental Market Pain

Stadium View Apartments in Bozeman.

State economists, business and university system leaders were in town Wednesday to discuss the condition of Montana’s economy, arguing for the importance of higher education.

As part of the annual Economic Outlook Seminar hosted by the University of Montana’s Bureau of Business and Economic Research, speakers addressed a slew of topics ranging from the effect of last summer’s solar eclipse on tourism to the continued decline of commodity prices.

Below are a few takeaways from the daylong seminar.

Gallatin County continues to lead the pack despite housing concerns

On the homefront, the real estate market still overwhelmingly favors sellers. The median sales price for a single-family home in Gallatin County rose again in 2017 to roughly $380,000, the highest in the state and well above the national median of $205,000.

However, local home construction hasn’t kept up with demand.

“There are some signs in the data that these markets are not entirely healthy,” said Brandon Bridge, director of forecasting at BBER. “This area is really leading the state by a lot in price appreciation. Normally this would be the perfect formula for increased construction activity. But construction is still falling below the peak in 2005.”

In the U.S., available homes are at their lowest level in 25 years, while in Bozeman 45 percent of renters pay more than 30 percent of their monthly income towards housing, the widely accepted benchmark for affordable housing. And residents shouldn’t expect affordability to get better anytime soon, Bridge said.

“I don’t know if we could build enough to keep up with demand,” he said. “And when demand outpaces supply, you’re going to have some price increases.”

With gains in health care, tech and manufacturing, Gallatin County’s economy remains the “poster child” for growth in the state, Barkey said. The county is adding more than 2,000 jobs per year, and earnings and wage increases continue to outpace the rest of Montana.

“In most industries, most Montana segments of the economy are improving,” Barkey said. “It’s a good story.”

Higher education is still worth it, educators say

The conference was titled “The Future of Higher Education in Montana” and featured an introduction from Montana State University President Waded Cruzado, as well as keynote speaker Bob Nystuen, Montana University System regent, both of whom argued that despite increasing costs, higher education still has value for Montanans.

“We need to continue to find better college affordability,” Nystuen said. “Every job of the future is going to need something beyond a high school degree. How do we provide an opportunity for more students to get a college degree? That’s something we need to work on.”

Bryce Ward, associate director at BBER, provided a handful of statistics that supported the continuing value of a college diploma, including the facts that college graduates are expected to earn twice as much as high school graduates ($52,000 per year versus $26,000 in Montana) and live longer on average.

Universities, colleges and technical schools all provide a typically recession-resilient economic boost to their cities and surrounding areas, Ward said.

“When a region adds a university, growth accelerates. And it’s not just a college-town effect, it’s region-wide,” he said.

A ‘Goldilocks economy’

Both the state and national economies continue their slow recovery from the Great Recession, leading to what BBER Director Pat Barkey called a “Goldilocks economy” — growth that’s not too fast and not too slow.

However, the picture isn’t entirely rosy. Commodity prices continue to be a mixed bag, with goods like wheat and barley remaining cheap and lumber and zinc trending higher.

General fund revenue in 2017, spurred by drops in individual income and property tax collections, was “meandering” and “weak,” according to Barkey. Part of this was the result of a slowdown in earnings and a decline in business-owner income across the state. While Montana’s fastest-growing industries continue to balloon — notably health care, professional services such as lawyers and engineers, and the accommodation sector — overall growth in non-farm earnings came in at 1.7 percent, down from 4 percent in 2015.

And while unemployment insurance claims are down, labor force participation rates (the fraction of the labor force that’s actually working) has yet to rebound from the recession, Barkey added.

“White men dropped out of the labor force and really never came back. And this is really detracting from growth,” he said.

Kendall can be reached at 406-582-2651 or lkendall@dailychronicle.com. He is on Twitter at @lewdak

Lewis Kendall covers business and the economy for the Chronicle.

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