Feeling the pinch

Industry catching its breath as Flathead construction slows

By NANCY KIMBALL Flathead Business Journal

Housing recession. Subprime mortgage crisis. Plummeting stock markets. Long-term inflation.

Some intimidating specters are floating on the sea of discontent in the early-2008 national economy, and specifically in the housing construction market.

Although the National Association of Home Builders said it expects home sales to turn upward by midyear and housing starts and construction spending to start recovering by the end of the year, individual sentiments fall into the wait-and-see category.

A Small Business Research Board poll released Jan. 22 found that nearly two-thirds of the small construction and contracting businesses polled nationally plan to hold the line on their credit requests this year. Eleven percent will cut back on credit while a quarter expect to increase their loan levels.

A year earlier, a third planned to increase their loan levels while a fourth said they would cut their credit needs.

Last June, the research board reported that taxes and costs for energy and fuel were leading concerns, booting long-standing worries over health-care costs from first into fifth place. Availability of quality workers and general economic conditions ranked third and fourth.

COMPARE THAT with concerns voiced by Flathead Valley builders.

Holding onto his workers is at the top of the list for Patrick Plevel. He builds all components in-house, so even though a pool of good workers is out there, Plevel Construction will stick with the known. The Columbia Falls home builder said the slowdown has cut him back to seven months of work lined up in advance, instead of his usual 18 months.

,John Schwarz, whose business is focused on commercial construction, said a better availability of workforce is a boon to Schwarz Construction of Kalispell. And even though projects are slowing down, he said that pace is giving subcontractors the time to put out better quality work and do it within deadline.

Another commercial contractor, Scott Davidson with Davidson Construction in Whitefish, said his biggest problem is labor. Workers who answer his ads for help may be well-qualified, but they don't stay long, he said. An employment agency can attract workers who stay longer, he added, but usually aren't as skilled.

Affordable-housing builder Ron Terry Construction, Inc., faces the same slowdown - which Merna Terry said is starting to pick back up - but a whole different set of problems. Increased utility and permit fees and simply finding affordable land are proving to be their biggest challenges to keeping construction affordable.

STATEWIDE, builders are feeling the pinch, but not to the degree reported nationally.

The Montana Building Industry Association reported that 2007 housing starts slid 5.8 percent from the state's banner year in 2006 - leaving the state "steady and stable" when compared with the nation's housing starts.

But it doesn't mean Montana is out of the woods yet, according to the association's quarterly newsletter, Montana Builder.

"Whether we like it or not, Montana is connected to the national economy," Montana Building Industry President Jeff Junkert stated in the publication. "Our country is in a housing recession. That has an effect on Montana's market. Hopefully it will be short-lived."

While Beaverhead County/Dillon in Southwest Montana saw a whopping 55 percent jump in housing starts in 2007 and Cascade County rose nearly 20 percent, the Flathead's booming growth rate slowed by more than 16 percent last year.

Other high-growth areas slowed, too - Ravalli County by 25 percent, Park County 21 percent, Lewis and Clark County 18 percent, Gallatin County 13 percent and Missoula County 6 percent.

Statewide, fourth-quarter housing starts were down 11 percent over the same period in 2006. December 2007 starts were down 20 percent over December 2006.

FLATHEAD County's 905 single-family housing starts, reported by Flathead Building Association, represented a drop of 177 houses from 2007.

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