Housing market turning the corner

By Joseph T. O’Connor Explorebigsky.com Editor

BIG SKY, BOZEMAN – Reports of growth on the national housing market are reflecting a local trend in Big Sky and the greater Gallatin Valley. While overall gains are modest, some local real estate authorities are feeling optimistic.

Big Sky local Jamie Daugaard, the principal architect for Centre Sky Architecture since 1998, has witnessed the housing rollercoaster “from the front seat” in the last decade, he said, watching the real estate world go from 60 to zero.

“It was like [the market] ran a marathon from 2002 to 2008,” Daugaard said. “Then in 2009 [in Big Sky], it just stopped running.”

Much of the country felt the recession’s effects a year earlier, in 2008, after sub-prime mortgages crippled the U.S. market, putting homeowners, real estate agents, builders and supply companies on their collective ear.

Subsequent federal bailouts failed to right the economy, forcing widespread foreclosures and leading the country, indeed the world, into the Great Recession and the greatest economic downturn since the Depression of the 1930s.

“Now, in 2012, water is flowing again,” said Daugaard, who moved to Big Sky from Denver 10 years ago. “I’m feeling good about the market.”

Beginning this spring, more people called Daugaard to move forward with building on recently purchased land. Compared to 2010, when only 10 percent of inquiring clients actually hired Centre Sky to design their future home, a recent upswing in contracts has him looking forward.

“Since April or May, 50 to 60 percent [of potential clients] are committed.”

The architect sees a number of reasons for this positive trend, including a change in family dynamics. People are tired of waiting for the market to show them it’s okay to invest again. They want to own a house, he says, even if that means cutting a few corners.

“The majority of people [we’re seeing] want quality spaces,” Daugaard said. “But are thinking, ‘how can we make it smaller.’”

“Maybe they’re not asking for [us to design] an 8,000 or even 6,000 square-foot house,” he added. “They might not need a media room or a second dining room. They’re trying to be more frugal with their construction dollars.”

Others in the industry are seeing similar trends in the low to middle-cost housing market, as well. Peter Lee, president and owner of Teton Heritage Builders, a custom home construction company with offices in Jackson, Wyo., as well as Gallatin Gateway, has watched the area market fluctuate based on differences in housing costs.

“The high end of the Gallatin Valley is still looking pretty soft,” said Lee, referring to the excess of supply over demand. “But the low end (under $700,000) is doing okay.”

In Bozeman, Tom Simkins, part owner of Simkins-Hallin, one of the largest building supply companies in the state, took note of a slightly improved market over the last year.

“It’s getting better,” said Simkins. “The rental market is saturated, and there is a noticeable increase in middle income and starter-type homes.”

Some of this success, Simkins said, is due to the Bakken oil boom in the Williston basin, N.D., part of which spills into Montana. Bozeman construction workers, out once plentiful work, joined the boom in droves, driving seven hours to Williston for work.

Every boomtown undergoes a transformation requiring services from contractors and workers, and Williston was no different. In 2000, its population was 12,512. By the 2010 census, the number had risen to 14,716; however, estimates including workers living in temporary housing put the population closer to 30,000, some claim it’s as high as 50,000.

“It kept a lot of people alive during the Recession,” Simkins said, indicating Montana construction workers could drive to the Bakken, work two weeks straight, then return home to their families, and increasingly their new homes. “They can make $100,000 a year driving a truck.”

Oil and natural gas extraction account for 35 percent of the town’s job market.

Those who found work in the Gallatin Valley during the recession stayed put, many roofing homes after a string of strong hailstorms in 2010 damaged houses around the Gallatin Valley.

These storms also allowed Simkins-Hallin, which opened its doors in 1946, to weather the housing squall, Simkins said. Many other construction supply companies incurred massive losses.

Simkins contends that the uptick he sees in Bozeman’s low to mid-range housing market is due mainly to this export of Montana carpenters, laborers and contractors to fulfill the surging need for apartments and commercial buildings around Williston.

Eric Ossorio, a broker for Prudential/Ossorio Real Estate in Big Sky thinks this demographic may be pulling up Bozeman’s housing market.

Ossorio, who has lived in Big Sky for 30 years, says the real estate market in the area reflects the national trend in a less convincing manner – people are buying smaller homes in generally busier hubs, closer to essential needs such as groceries.

“People are coming back to the center of the market,” he said. “If you live out in Beaver Creek, you’re a half hour away from butter. You have to change the recipe.”

“The good news in Big Sky, is there are sales,” he added. “We had 10 Firelight condos on the market this summer, and now there are four. But the national trend is people are still nervous.”

The numbers reflect this consumer apprehension, but the market appears to have turned a corner – one for the better.

Statistics from the Gallatin Association of Realtors for Gallatin County indicate by the third quarter of 2011, 262 units sold, whereas by the 2012 third quarter, 345 units were gone. These statistics show only the numbers through October 2012.

GAR’s annual report for the county since 2004 shows housing numbers trending positive in the last two years. In 2009, 688 units sold, as compared to 1,224 in 2005. But since that low year, it’s looking better.

“There’s a bit of a bell curve from 2005 until now,” said Mike Lake, technology coordinator at GAR, who called the current scenario “a buyers’ market. We could potentially see more than 1,000 single-family homes sold by the end of the year.”

GAR statistics show 896 homes sold by Oct. 31 of this year.

“Buyer confidence in Big Sky is between 8 and 10,” said Ryan Kulesza, a former agent for Big Sky Sotheby’s International Realty. He pointed to low interest rates, a saturated rental market, and property prices below replacement costs, as incentives.

“It’s a perfect storm to buy in,” he said. “If you haven’t found the perfect deal by now, you might have missed the boat.”

Many agents believe Big Sky has an edge over other parts of the country.

Even The Yellowstone Club, which has seen financial squalor in recent years and filed for bankruptcy protection in 2008 when the market was at its worst, has seen a light turn on.

“We see a firming up of the market,” said Bill Collins, vice president of sales at the Club. “There’s more velocity [now] than we’ve seen in the last five years.”

Sales are up 30 percent at The Yellowstone Club, according to Collins, and there are currently 25 homes under construction.

“Smart guys like buying stuff on sale,” he said. “I’m excited [about the positive housing trend]. As we are successful, so is the community.”

Ossorio sees Big Sky as an isolated pocket, one that can bring in buyers from the outside market.

“We have a bit of a refuge community,” Ossorio said. “From LA to Houston … people are sitting in traffic for three hours a day. [They’re thinking], ‘why not live in Big Sky and visit Houston?’”

Lee delved deeper, saying we’re living during the “third industrial revolution,” a convergence of the Internet with renewable energy systems. With this advanced form of communication through online technology, people can live wherever they want.

“It’s a quality of life [issue], as opposed to a proximity to trading partners,” said Lee, who moved from Jackson to Bozeman in 2003. “All these rich guys don’t have to live in California anymore.”

Kulesza understands this train of thought.

“Big Sky is like Starbucks coffee,” he said. “Nobody needs it, but it’s nice to have.”

Although things are beginning to look up, consumers shouldn’t expect to see recovery in the economy or the housing market overnight – consumer confidence has not yet fully recovered.

“People are still nervous about the economy,” Ossorio said. “And they need confidence. If people can get comfortable again, and hold and maintain a job, we will continue on an upward trend.”