Housing starts locally will come close to meeting the demand this year, according to a leading area economist.
New building permits are running ahead of last year; permits totaled 1,217 through July 2012, increasing to 1,757 for the first seven months this year, a jump of 44 percent.
Fred Crowley, economist with UCCS, tracks supply and demand with building permits and housing prices in the Pikes Peak region.
“The question is: Is this sustainable or is it a temporary blip?”
– John Bissett,
JM Weston Homes
Crowley called this year’s growth “enormous. It’s a phenomenal building year.
“Some of that is rebuilding going on in Mountain Shadows,” the subdivision affected severely by the Waldo Canyon fire, Crowley said. In the past 12 months, more than 200 building permits have been issued for Mountain Shadows, where nearly 350 homes were lost.
“It’s still up a boatload, including the assumption that half are for this year,” Crowley said of the Mountain Shadows permits.
Demand has increased, increasing the pricing of homes. That, Crowley added, is enabling some people facing foreclosure to avoid it while selling their homes.
Home foreclosures in El Paso County this year are projected to range from 2,000 to 2,400, down from 3,364 last year, according to Crowley.
The new construction created more jobs this year, he said.
The number of construction, retail and tourism jobs has increased by 6,160 this year over last, Crowley said, an increase of 2.3 percent. Wages are also up, a little more than 2 percent over a year ago, he said.
“People have more money to spend, and they’re spending it for housing,” Crowley said.
He attributed a portion of the increase in spending on housing to the fixed mortgage rate, currently in the range of 4.5 percent.
“Since the history of the 30-year fixed mortgage, from 1972 forward, the average is 8.6 percent,” Crowley said. “It’s almost half of what it used to be. That’s a bargain.”
John Bissett, president of the Housing and Building Association of Colorado Springs and president of JM Weston Homes, said Colorado Springs builders are responding to a demand that has been built up during the past seven years.
“The question is: Is this sustainable or is it a temporary blip?” he asked.
Builders now have more confidence than they did just a few years ago, leading to a more sustained recovery, he added.
His company will see the number of sales this year double over last year. A small company, JM Weston Homes handled 17 closings in 2010, 16 in 2011, “and we will do 35 to 37 this year,” Bissett said.
He added that few builders are constructing “speculation homes,” or homes that do not already have buyers.
Instead, builders are responding to the rising demand, he said.
“Buyers are starting to see interest rates increase and property values increase, and people are realizing it’s no longer the time to be sitting on the sidelines,” Bissett said.
The same holds true at other residential real estate and home-building companies.
“We’ve absolutely seen the market come back, there’s no doubt about that,” said Kyle Fisk, director of marketing for family-owned Challenger Homes. “We’re certainly seeing an increase in demand.
“We’re on track for our best year ever,” he said, adding that the company started in 2000.
Last year, Challenger closed on 262 homes, and this year it is “on track to do somewhere around 300 closings,” Fisk said.
Other builders say the demand is increasing for them, as well — saying that the two wildfires during the past two years have created more demand.
Hi-Point Builders built and sold 17 last year, and “we would like to do 20 this year,” said Wayne Intermill, president. Intermill said the Waldo Canyon and Black Forest fires created a greater demand.
“If we had neither of those fires, we would not have had the impulsive buyers,” Intermill said.
Nationally, housing starts are projected to reach 900,000 this year, said National Federation of Independent Businesses Chief Economist Bill Dunkelberg.
At the height of the recession, housing starts were at 500,000, Dunkelberg said. Since 2008, new construction starts have slowly improved.