Denver-area builders pulled 5 percent fewer permits for homes in the first seven months of this year compared to the same time last year, according to a report released today by the HBA of Metro Denver.
Meanwhile, permits, which reflect future construction, rose 86 percent for apartment units on a year-over-year basis. Developers pulled 570 for apartment units year-to-date, compared with 307 during the first seven months of 2010.
The report shows that builders pulled 2,418 permits for detached single-family homes and attached homes – such as condos and townhomes – from January through July, compared with 2,544 during the same period last year.
The biggest percentage drop was for single-family detached homes. Builders pulled 372 permits compared with 481 permits last year, a 22.25 percent drop. Of the 372 permits, 110 of them were in Denver.
Permits for attached homes meanwhile, were down less than 1 percent, with 2,046 compared with 2,053 last year. In July, permit activity was up 4.5 percent with 320 permits pulled compared with 304 in July 2010. The report includes the counties of Adams, Boulder, Broomfield, Denver, Douglas, Elbert, Douglas, and Jefferson, as well as the individual communities in the country.
“I think the builders got pretty optimistic and thought they would have a stronger first half of the year than they did, and pulled quite a bit of permits,” said Mike Rinner, of the Genesis Group, which tracks housing along the Front Range.
Sales surprisingly strong
However, he said that a separate analysis the Genesis Group did was encouraging.
“I was really encouraged to see the number of new home sale contracts in the first half of this year was equal – or at least within 1 percent or so – of the same period in 2010.”
That was somewhat surprising because in the first four months of 2010, the government’s federal tax credit program, which provided $8,000 in tax credits to qualified first-time buyers, was still in place.
“The big question is, what will happen in the second half? We’re hoping that we can hold our own in the second half, or even better, be up 5 percent or 10 percent ahead, because we won’t have the tax credits driving demand,” Rinner said. “But we will just have to wait and see. There is just so much going on with the economy. When the stock market nosedives like it did, it doesn’t exactly inspire consumer confidence. And we’re really not making much of a dent in the Denver unemployment rate.”
The report also shows that Richmond American Homes of Colorado – owned by Denver-based homebuilding giant MDC Holdings, remains the top builder in the Denver area by a wide margin.
In the first seven months of the year, Richmond pulled 261 permits. Its closest competitor was D.R. Horton, with 162 permits. In all of 2010, Richmond pulled 721 permits in the Denver area.
“That Richmond continues as the No. 1 builder is not surprising,” Rinner said. “Richmond started getting more aggressive earlier than anyone else in the Denver area as far as buying land and starting new projects. They became pretty aggressive when everyone else was kind of shell-shocked. I think they opened 22 new communities last year.
Small is big
What is different than in the past, many of the communities are small. A few years ago, Richmond and other large and even medium-sized builders wouldn’t consider a community with fewer than 100 lots.
“They became pretty aggressive when everyone Now, they’re looking at 20-to 50-lot projects or even smaller,” Rinner said. “I was talking to a builder last week and I asked if they would look at 10 units, and he said they would if the numbers penciled out. Builders are looking at every little pocket, every little niche, to stay alive.”
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