The Leeds School of Business at CU-Boulder released their mid-year economic update last week. Here are the highlights for our state and these numbers are through May—
- New single-family housing permits are down a whopping 18.4% year over year.
- Multifamily housing permits are down an amazing 30.3% year over year.
- CO employment growth is down to 1.9% year over year, down from 2.8% last May.
- Personal income in CO is up 5.1% in the first quarter, good for 5th best in the country.
- In 2018 CO experienced GDP growth of 3.5% and this rate of growth continued through the first quarter.
Further MetroStudy released their 2nd quarter report privately last week and here is what they reported for Metro Denver—
- Starts of new homes dropped 10.5% in the second quarter vs the second quarter of 2018.
- Single family new home starts were down an astounding 17.6%
- The average size of a new home is down 18% this year.
Amazing to see new permits and starts both down by double digit percentages! With permits down even more we should expect that starts will drop further this year and of course homes completed and sold will also drop dramatically.
Why is this happening? MetroStudy Director for Denver John Covert said, “This isn’t nearly indicative of demand slowing down. There has been a dramatic shift. Builders are trying to get more affordable and to get into touch where market demand really is.” For several years builders have been building Cadillacs and now the market wants Chevys. And changing from Cadillacs with larger lots and bigger homes to a smaller more compact house and lot takes a lot of time as some developments will need to be re-done and re-zoned and re-approved by local governments. This takes a long time.
I think multi-family permits are slowing because banks are putting the brakes on developing apartment communities by tightening their lending standards. Plus we have built so many apartments for the last 5 years that this number had to decrease at some point in time.