Spike in new-home sales is welcome news for builders

Home builders are emerging from the recession with some of the strongest sales and activity figures they’ve seen in years.

Single family building permits were up almost 25 percent year-over-year in the first quarter and permits issued in April were up more than 40 percent compared to 2011, according to the Pikes Peak Regional Building Department.

The return of new home sales signals better times for builders that have been seeing a fraction of the activity they experienced during the housing boom. It also has dirt moving in developments where builders are starting to buy up lots and developers are looking to break ground on more in anticipation of an accelerating market.

“It’s not going to be a blow out year,” said John Cassiani, president of the Colorado Springs Home Builders Association. “It’s not going to be up 100 percent. But we are optimistic.”

The last few years have been hard on builders, who have had to lay off workers and scale back operations to get through the tough times, said Cassiani, who is also president of Banning Lewis Ranch, a large residential development on the east side of town.

“There definitely aren’t as many builders here now as there were a few years ago,” he said. “The good local builders are still here and they’re still doing OK.”

But a lot of the big national builders pulled out of Colorado Springs, he said.

Because of that, new business is spread out between fewer builders, which makes the recovery a little smoother, said Lee Bolin, president of Saddletree Homes.

He said business is coming back strong this year.

“We’re selling and building houses,” Bolin said. “We can’t keep them around.”

He said sales in the first quarter of this year were up about 15 percent over the same period in 2011, which was a better year than the few before it. Saddletree sold about 30 homes in 2011, Bolin said. That was down from 89 in 2005, which was the company’s best year.

“You only have an economy like in ‘05 once or twice in your lifetime,” he said. “I think it could be 10, 15, 35 years before we see anything like that again.”

Saddletree builds higher-end semi-custom homes in Cathedral Pines, Jackson Creek, Flying Horse and Cordera. They range in price from $350,000 to just under $1 million.

Bolin said about a third of his customers are moving from out of town — most for work and some to retire. The others are either upgrading or downsizing their homes.

The year is also starting off better for Campbell Homes, which has had a hard time through the recession.

The company sold 132 homes in 2003, its strongest year. It sold a fraction of that — 38 homes — in 2011, said Campbell CEO Randy Demming.

“Our goal this year is 60,” Demming said. “You’ve gotta keep swinging. At this point I think we’re on track to make that.”

Campbell is building at Cordera, Meridian Ranch, Falcon Hills and The Gables. The builder is buying new lots in preparation for more building, Demming said.

Bolin said he worries builders will run out of new lots since developers haven’t been opening new ones up for builders to buy. There might be space, but developers haven’t invested in infrastructure like streets and sewers to ready them for builders, he said. It’s possible that a shortage of lots could cause the prices of new homes to rise on a faster increase in demand than supply.

Cassiani said he doesn’t worry about a shortage of lots.

“There’s a lot of land within the city limits that could be developed,” he said. “Even Banning Lewis — we have over 300 lots just sitting there, ready for someone to buy them.”

Developers learned their lessons after the recession and are likely to invest in smaller plats at a time to avoid getting too far ahead of demand and borrowing before there is a revenue stream to make loan payments.

Meridian Ranch, a master planned community on the far east side of Colorado Springs near the intersection of Woodmen Road and Highway 24, has several new lots in construction, said development spokeswoman Shelley La Judice.

The neighborhood opened 54 lots to builder sales in 2011 and so far this year has opened almost five times as many — 253 lots — and has an additional 350 lots in the design process that will start construction in early 2013. That’s in addition to another 58 custom acreage lots in the design phase.

The neighborhood, which features a golf course, trails, schools and space for commercial development, has room for 3,000 single-family lots. About a third of them have been sold and built on since the community broke ground 10 years ago, La Judice said.

Challenger Homes principals are also unconcerned at the prospect of running out of lots to build on. The builder is working in 12 different neighborhoods from Monument to Fountain and from Falcon to the west side right now. The company’s founder, Brian Bahr, has also created a new firm — Rivers Development, said Challenger marketing director Kyle Fisk. That new firm is looking at some of the abandoned vacant land already slated for residential development and will be able to develop new lots.

Challenger was the No. 1 home builder in 2011 with 187 new home sales. It was the builder’s best year since it started in 2000. The first quarter of 2012 was the company’s best quarter ever, Fisk said.

The company diversified its offerings both geographically and by price point. It offers new homes ranging from $150,000 to over $500,000, Fisk said. And it grew steadily throughout the recession.

“In 2007, when the bottom kind of fell out of the housing market, Brian Bahr pulled the staff together and said, ‘we can hunker down, lay people off, or we can thrive and find a way to grow in spite of the challenges,’” Fisk said.

The company doubled its marketing budget and pushed through the tough years.

Even though Challenger wasn’t hurting as much as other builders during the recession, Fisk said this year is extra promising.

“We’re optimistic,” he said.