By JAN FALSTAD
Of The Gazette Staff

"Our region has been so dependent on housing and real estate costs in the past 15 years, we have a vulnerability that other regions don't have," he said.

Housing heaven abating

In March, Swanson said Montana's economy was doing well despite the national malaise.

Now, as housing slows and gas creeps toward $3.80 a gallon, he's more pessimistic.

For a long time, construction and housing have been the economic locomotive driving healthy growth in Montana. But that growth rate is slowing in Billings, Bozeman, Helena and Missoula, according to Multiple Listing Service data.

On top of that, the national housing crisis isn't over yet, Swanson said.

"We're only about one-third of the way through the housing problems in terms of losses in the write-offs and the damage that is being done," he said.

By late summer or fall, as foreclosures deepen the downward spiral, Swanson predicts Congress will do something again to give the economy a chance to recover.

That assumes President George W. Bush keeps his promise to veto the homeowners rescue bill working its way through Congress.

But the current housing picture is mixed. While housing prices have fallen 10 percent or more in the hardest hit U.S. cities, home values in Billings still are rising.

In 2007, the median price for a single-family home rose 5 percent to $180,000 over 2006, according to Realtor Howard Sumner. "Median price" means half the homes sell for more money and half for less.

However, last year 5.6 percent fewer homes sold than in 2006, according to the Billings Association of Realtors.

Still, the Billings housing market is beginning to pick up as it usually does after Mother's Day, according to Ed Hudson, immediate past president of Montana Association of Realtors.

"We're having more houses come on the market and getting sold," Hudson said. "And in some of the newer homes, I think the sellers have dropped their prices. I have two listings for $150,000."

Commercial and industrial construction projects already in the pipeline should continue at a fair clip, Swanson said, but he sees a different story for homes.

"I think you're going to see significantly less construction activity in the next few years, especially in residential," Swanson said.

Cruddy crude prices

Crude oil has jumped from $85 a barrel to beyond $120 and may be heading toward the previously unthinkable $200 mark in the next year or two, according to investment bankers at Goldman-Sachs.

These largely inescapable energy costs hit every business, school and household and have a huge dampening effect on Montana's economy, Swanson said.

"There's no question you can have much more economic activity when the costs of doing business and the costs of personal consumption are lower than when they are higher," he said.

In a state with few mass transit choices, most Montanans cannot abandon their car or truck and hop on a bus to their destination. In larger cities, mass transit systems are reporting standing-room-only crowds as people stop driving to save money.

In 1980, Montana's total energy costs were $1.4 billion. When the latest statistics are released this summer for 2007, energy costs may top $7 billion, Swanson said.

"Per capita income in Montana, depending on where you are, has certainly risen in that same period, but it isn't rising nearly as fast as those energy costs," Swanson said. "So, energy costs are outstripping income."

Rising energy costs also bring windfall profits for lucky producers and millions in severance taxes from Eastern Montana's oil-and-gas boom.

The boom is real and welcome, Swanson said, but those revenues still don't amount to much of the state's gross domestic product.

In 2005, job income from oil-and-gas production accounted for less than 2 percent or $500 million of the $30 billion annual GDP in Montana. Those statistics are old, but are the most recent available.

When the next batch of numbers comes out this summer reflecting the rapid rise in fuel costs, Swanson said oil patch jobs may account for up to $700 million of state GDP.

Finally, if crude does hit $200 a barrel in the next 24 months, Swanson said oil-producing nations may have climbed out too far on the high-profits limb.

"Anything is possible, but I think there will be constraints on oil-producing nations not to create worldwide economic chaos," he said.

Published on Sunday, May 18, 2008.
Last modified on 5/18/2008 at 1:37 am