While this page is primarily about the Billings housing market, I try to keep track of the Red Lodge area as well. It's a low-income, high-priced vacation area that may be prone to the same downturn that Big Sky and other formerly high-flying resort areas have seen. In fact, stats from Gary Khatchikian show that prices are already down 18% from last year.

In my 2008 housing video, I highlighted the Spires at Red Lodge subdivision. Located on the hill northwest of Red Lodge, the Spires has room for 400 residential lots.



Construction on the first Spires home started in 2007. The subdivision received a fair amount of publicity and surrounded itself in hype. Here's an excerpt of a 2008 write-up by the developers:

People that purchased real estate in Jackson, Wyoming during the 1970s and 1980s are dancing a jig today. That is because this southern entry community to Yellowstone National Park has seen real estate prices rise twenty-fold or more, as some of the nation's wealthiest individuals purchased real estate in the area ... The charming Victorian mining-era town of Red Lodge, Montana may be just the type of real estate investment that Jackson, Vail, Aspen and Park City once were.

...

When asked why Red Lodge real estate is so inexpensive, architect Don McLaughlin says, "That is a good question and a question that we don't feel will be asked for many more years as we expect to see prices rise."

In March 2008, the subdivision was touted as "sustainable" in a Billings Gazette article, and the developer boasted that "the subdivision has sold $2 million worth of lots since September, making it the hottest-selling development in the Red Lodge area."

All the hype made it sound like a real estate no-brainer, but was it really? Now 2 1/2 years later, we can take a look and see.

First, a look at lot sales. By summer 2008, the developer had sold 15 lots in the first phase. Today? 17 lots sold. Which means 2 total lots sold in the last year and a half (for the record, that means 278 years' supply of lots in the subdivision). After the initial surge, sales have tanked. A new pricing sheet shows that lots have now been marked down 20-30%.

What about development on the lots that have been sold? You can see the grim reality in the photo below. The place is empty. On a visit last month, I saw only two houses and no signs of new construction. This means that only one additional house has been built since the initial one in 2007.

All the creek-side lots were sold two years ago, but they have not been developed at all. This suggests to me that these have been sold to lot speculators-- not people who want to build houses and live in a sustainable community.

As for the one new house that has been built, there's an interesting story behind it. You can read all about it in the Carbon County News. The lot was sold "below cost," and the house was built using a Montana Board of Housing HOME grant. Russ Squire of the Spires goes on to say that "I think most of Red Lodge qualifies for this. They can build a brand new home that in many instances cost less than what they are renting. We can do some good in the community and help Red Lodge working people get into homes they can own here."

Wanting to provide affordable housing is a noble cause, but I don't think this says much for the developer's hopes of Red Lodge prices taking off. Remember, in 2008 the developer hinted that Red Lodge would be like Jackson Hole where "some of the nation's wealthiest individuals purchased real estate."

The harsh reality is that one new house has been built at the Spires-- for a worker who makes under $35,000/year and relies on a subsidy to push the payment down to $600/month. This is a low-income state, and anyone building high-priced housing is taking a big risk.