- New home permits up 51%.
- Building activity still low by historical standards.
- Builders filling void created by low inventory of resale homes.
Home builders in the Denver area pulled 51 percent more building permits for single-family homes in 2012 than in 2011, according to a report released this afternoon by the Home Builders Association of Metro Denver.
The report showed that builders pulled 5,345 permits last year, 50.78 percent more than the 3,545 in 2011. The report tracks building activity in the counties of Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas, Elbert and Jefferson, as well as all of the communities in those eight counties.
When townhomes and apartment units are included in the mix, a total of 9,569 permits were issued, 49.8 percent more than the 6,387 permits issued in 2011.
A total of 3,240 permits were issued for apartment units in 2012, a 61.35 percent jump from the 2,008 in the prior year.
Permits indicate future construction activity.
However, don’t be fooled by the huge percentage gains, either for economist Patty Silverstein told about 700 business leaders this morning, who attended the 20th annual Vectra Bank Economic Forecast Breakfast.
“They’ve been building nothing,” so the year-over-year percentage gains are huge, said Silverstein, the chief economist for the Metro Denver Economic Development Corp. and the Denver Metro Chamber of Commerce.
Silverstein displayed a graph on a screen that showed total building activity is still about half of the historic averages since 1994. Activity hit an all-time low in 2009, with only about 3,500 total permits issued. Silverstein’s forecast calls for about 10,000 total permits last year, still low by historical standards. In 2000, builders pulled almost 30,000 in total permits.
Silverstein also said that a 17.5 percent increase in resale home sales last year, while stronger than expected, also needs to be put into perspective.
“It seems amazing, it seems astronomical,” Silverstein said, but added that 2011 was still a very weak year for home sales activity, leading to the big percentage gains.
Silverstein also noted that there are only about 7,700 single-family homes on the market, the lowest in decades. The low supply, coupled with strong demand, is driving up prices.
Indeed, rising home prices are raising concerns that the Denver housing market will become more expensive than homes in many neighboring states, making it hard to compete for companies looking to move here or expand.
“We are now the 18th most expensive housing market in the country,” Silverstein said. “Once again, we have the highest housing prices between the coasts. We have the most expensive home prices in any city without an ocean. Other than Burlington, Vt., which is 17th. But Burlington is on the East Coast.”
Peter Niederman, CEO of Kentwood Real Estate, which sold a record $1.7 billion in homes last year, said that builders are doing an excellent of filling the void created by so few previously owned homes on the market.
“Frankly, builders probably have never done a better job of bringing the right kind of homes to the market at the right time,” Niederman said on Tuesday, talking about the overall market, while commenting on Denver’s strong showing in the latest Case-Shiller report. The Case-Shiller report showed homes in the Denver area gained 7.8 percent from a year earlier in November, the biggest percentage gain in about a dozen years.
Not only are there fewer resale homes to choose from, but some consumers prefer new homes because they are more energy-efficient and have more contemporary layouts than older homes, Niederman said.
Independent broker Gary Bauer agreed.
“Builders are doing a great job of building homes to meet the wants and needs of consumers in Colorado,” Bauer said. “A lot of builders are coming to the market with new models and designs just for the Denver-area buyer.”
To learn what home builders are offering, please visit COhomefinder.com.
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