As national headlines screamed that 2011 was the worst year on record for the sale of new homes, Denver bucked that trend, shows a report released today.
“Denver is de-coupling itself from the national market and is moving to the forefront in the recovery cycle,” said Jeff Whiton, President and CEO of the HBA of Metro Denver. “We are encouraged.”
Nationally, the Commerce Department reported today that about 302,000 new homes were sold last year, the worst year since at least 1963, when it began tracking new home sales.
By contrast, the HBA of Metro Denver this afternoon released a report showing that builders in the Denver metro area pulled 3,545 building permits last year for single-family detached homes, 4.9 percent more than the 3,379 in 2010. The HBA does not track sales or housing starts. Permits reflect future building activity.
“Housing activity is up almost 5 percent, which is a step in the right direction,” Whiton said. “”The numbers are still small. We are still down 70 percent or 75 percent from 2006 and 2007,” before the Denver-area and national housing collapse.
“Denver is considered one of the strongest markets in the country, as far as emerging from this down cycle,” Whiton said. “Some major cities in Texas are coming back and certain parts of California. Denver is on the forefront of the recovery.”
Although the permit activity doesn’t correlate exactly with sales, home builders are constructing new homes to meet demand, Whiton said.
“Builders are responding to market conditions,” he said. “They are doing really well against the resale market right now. There is not very much resale inventory on the market, so builders are providing the right product to meet the needs of consumers.”
The report includes the counties of Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas, Elbert, Jefferson and all of the communities in those counties.
Denver showed the most activity, with 623 permits pulled, followed by Aurora with 501.
In December, permit activity was up 14.2 percent from December 2010, but the numbers were small – 274 compared with 240.
Whiton said that in addition to the shortage of resale homes – which are at the lowest level in more than 10 years – new homes increasingly are packed with energy saving features.
“It is really almost a sea-change in green features,” Whiton said. “That is giving new homes a real market edge over resale homes.”
The dismal national home sales numbers helped fuel a drop in the stock market, with most home building companies getting hit especially hard.
Denver-based M.D.C. Holdings Inc., parent of Richmond American Homes, was no exception, with its stock dropping 1.45 percent to $21.
M.D.C. was the largest builder in the Denver area last year, pulling 444 permits, a 38.8 percent drop from 2010, when it pulled 726 permits.
Meanwhile, builders pulled permits for 2,008 apartment units, double the 1,003 pulled in 2010. Municipalities issued 834 permits for single-family attached homes, such as townhomes and condos, 4.5 percent more than the 798 in 2010.
In total, builders pulled 6,387 permits for all housing types, a 23.3 percent increase from the 5,179 issued in 2010.
“Last year, at this time, we made the bold statement that we would have about 6,000 new housing units in the Denver area, and now the data is showing about 6,300, albeit most of it is coming from multifamily,” said Patty Silverstein, chief economist for the Metro Denver Economic Development Corp. “We were predicting that 2012 would continue to increase, about 14 percent above 2011 levels. With the December data, we may revise our outlook upward.”
But she cautioned it’s not time to break out the bubbly.
“We are still significantly below historical norms,” Silverstein said. “This is not a boom by any stretch of the imagination.”
On the other hand, builders are not adding too much supply to the market, added Silverstein, who also is principal of Development Research Partners.
“When we look at growth in the Denver region, Denver is on the brink of needing some new housing units. Our overall housing market never soared like so many other places during the boom, and we never had the huge downfall.”
Even modest increases in home construction helps fuel the overall economy, and not just by providing jobs for people in the trades, from framers to drywallers, plumbers to electricians.
“The housing and construction industry have very large multiplier effects that ripple throughout the whole economy,” Silverstein said. “Once someone buys a home, they typically need to furnish the house. So occupants of new homes also have a very large multiplier effect,” creating more jobs.
Contact John Rebchook at JRCHOOK@gmail.com