Vote of confidence in recovering housing market

Filed under: real estate column |

Vantage Homes has opened its Monterey II model home in Cordera. It features a slightly smaller, more affordable floorplan, in response to market demand.

In the “good news” category, two area home builders are planning additional models, banking on an improving home sales market during 2009.
Vantage Homes will open its Monterey II European cottage-style model in Cordera at 4872 Turquoise Lake Court next spring. The three bedroom-plus-loft home will include Energy Star and Built Green features, as well as “move-up” amenities like a gourmet kitchen with butler’s pantry, entertainment area and hardwood floors.
The company also builds in Wolf Ranch, Flying Horse, Meridian Ranch and Stone Crossing.
Vantage Director of Operations Joliene Weiss said the model came in response to a changing market, where buyers have become increasingly interested in getting luxury amenities, but in a slightly smaller home at a more affordable price.
“We’d built our previous model two years ago, and things have changed since then,” she said.
Likewise, Oakwood Homes will join Classic Homes, Capital Pacific Homes, Todays Homes and John Laing Homes in building at Northtree at Banning Lewis Ranch.
Oakwood Homes President Jay Walther said the company, which also builds in The Gables and Feathergrass in Colorado Springs and at Berland Green in Fountain, is betting on success at Banning Lewis Ranch.
“We’re confident that the local real estate market will turn around,” he said. “As this market improves, they will continue to attract buyers. They’ve set the standard in Colorado Springs of what home buyers want in terms of a well-planned master planned community where there are already great amenities in place.”
Oakwood’s two models, just off Dublin and Vista del Pico, are scheduled to open early next year.

Lender’s perspective

In a tough commercial real estate lending environment, it’s helpful to know lenders are still interested in doing business.
Jerry Kendall, a director for Johnson Capital in Denver, said that earlier this year the company financed two major apartment deals in southern Colorado — the $5.25 million 122-unit Citadel Village and the $5 million 137-unit Village East Apartments — that are typical of what he views as “fundable” commercial real estate.
“We work in Colorado Springs with Griffis Blessing, with Doug Carter at Sperry Van Ness and with Ken Greene at ARA — mostly on apartment deals,” he said.
And while only about 15 percent of the company’s portfolio includes loans for property in southern Colorado, Kendall said his company sees real growth potential in the area.
Kendall looks for multifamily and conservatively leveraged owner-user deals that qualify for private equity or insurance company financing.
“The insurance companies stayed very conservative — even through the last boom,” he said. “That leaves them well-equipped to work with investors now who want to take advantage of good deals in a tough market — and have the money to put down.”

Leasing, jobs linked

Bob Bach, Grubb & Ellis senior vice president and chief economist, sees employment trends as key to recession’s impact on commercial real estate. Especially hard hit, he predicts, will be tenant demand, which typically lags behind the labor market.
“The recession has entered its 12th month, already longer than the prior two recessions, but it appears to be growing in intensity. The prior two recessions in 1990-91 and 2001 both lasted for eight months,” he said in a report published Dec. 5.
While layoffs got off to a moderate start during January through September, almost 2 million job losses are predicted by year end.
The resulting impact on commercial real estate is clear.
“Job growth is the … leading indicator of office space absorption, and it supports leasing activity for apartments, shopping centers and, to a lesser extent, industrial properties,” Bach said. “The recent acceleration in job losses capped by the massive loss in November indicates that leasing market fundamentals (will) soften further. It is very likely that job losses will continue through most of 2009, meaning that tenant demand for commercial real estate, which lags the labor market, may not firm up until 2010.”
Bright spots emerged in the education and health services sectors, which added 52,000 jobs during November, while government added 7,000 and natural resources and mining added 4,000.
All other sectors lost jobs, with the biggest loss in professional and business services, where employers eliminated 136,000 positions — 78,000 of which occurred in temporary help services.
Turner Commercial Research author Paul Turner seemed to agree with Bach’s analysis in his third quarter 2008 report, noting that Colorado Springs has more than 10 million square feet of vacant commercial space, including several large floor plate facilities and hundreds of smaller buildings.
“Unfortunately, many small users … provide products and services to large users, and as these users diminish, so will the small users,” he said. “With the exception of a few niche markets where demand is proven, speculative construction will be nonexistent for the foreseeable future. In light of rising unemployment accompanied by a decline in sales, retail construction will slow to small additions and expansions to existing centers.”

One more metric

A number of local and national sources, including El Paso County Assessor Mark Lowderman, have weighed in about downward pressure on home values in the Pikes Peak region.
El Paso County’s tax rates could reflect home value decreases of as much as 6 percent, depending on neighborhood.
In its Nov. 30 report, First American CoreLogic added its Home Price Index figure for Colorado through September as negative 3.39 percent. The index takes into account, however, places such as Boulder and several mountain communities where prices have remained stable or risen slightly.
Still, Colorado fared far better than California, Arizona, Nevada, Florida, Rhode Island and Hawaii, where double-digit drops have stalled the residential real estate market.
Becky Hurley covers real estate for the Colorado Springs Business Journal.