New home building activity in the Denver area continues its torrid pace, shows a new report by the Home Builders Association of Metro Denver.
In the first seven months of the year, builders pulled 3,035 permits for single-family detached homes, a 48.3 percent increase from the 2,046 during the same period in 2011, shows the HBA report.
In July, counties issued 532 permits in the metro area, a 66 percent jump from the 320 in July 2011.
July marked the 16th consecutive month that permit activity has bested the same month a year earlier. Permit activity reflects future construction. The HBA report includes the counties of Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas, Elbert, and Jefferson, as well as all of the communities in those counties.
“In essence, this report is showing that the public is starting to understand it is better to get out there and buy than continue to rent,” said housing consultant S. Robert August. “It is a very positive sign that the market is picking up.”
Builders, he said, are taking advantage of the dearth of resale homes on the market. Resale inventory is down more than 40 percent from a year earlier.
“That is exactly correct,” August said. “There is not much to choose from on the resale side, so builders are filling that void.”
August said that consumers who wait to buy new homes almost certainly will be paying more in the near future.
“Right now, buyers can take advantage of historically low mortgage rates and they can buy at a time when building materials and labor costs are relatively low,” August said.
Interest rates are likely to rise, and builders are going to pass on inflation in materials and construction to consumers, he said.
Tom Cryer, a broker with Kentwood Real Estate, recently showed homes to two out-of-state buyers. Both of the buyers ended up buying new houses – one in Aurora and the other in Castle Rock.
“They both came to town thinking resales were going to be the answer to their housing needs, but when push came to shove, they both ended going to the new home market,” Cryer said. Both buyers are going to close on the homes in the coming weeks. One home is priced around $325,000 and the other around $290,000.
Not only is there a shortage of resale homes, but a lot of homes on the market do not show well, and turn off many buyers, he said.
“A lot of homes out there are in bad condition, have cat smells and are not well maintained,” Cryer said. “There is such of shortage of homes out there that some people think they don’t have to do anything to stage their homes or make them presentable. That might be true if in your wildest imagination, you can say your house is near Washington Park.”
On a recent weekend, Cryer looked at a home in Platt Park, not far from Washington Park, which hit the market that day.
“That afternoon, they had 13 written offers, including from a number of investors who were willing to pay cash, with no contingencies,” Cryer said. “They had narrowed it down to four finalists. They all had offered more than the list price.”
However, if a home that does not show well and is not in a super-trendy neighborhood, will be tough to sell, even in today’s market, he said. Lane Hornung, president and CEO of 8z Real Estate and COhomefinder.com, made the same point in a recent interview with InsideRealEstateNews.
Meanwhile, the HBA report also showed that permit activity for single-family attached homes – condos and townhomes – also is up, but not as much as for single-family detached homes.
Builders pulled 488 permits for condos and townhomes through July, a 31 percent increase from the 372 in the first seven months of 2011. Denver has the biggest share of those permits, with 186. Douglas County was No. 2 with 69.
Paul Tamburello, an owner of Red Chair Realty Advisors, said as of this morning there is not one “new construction” condo listed for sale in Metrolist in northwest Denver. He was surprised, because there had been five new condo listings in Lower Highland in early August.
To help address the shortage of new construction, infill developer River Meadow LLC today announced it was joining a number of other developers with a new project in Highland.
River Meadow has broken ground on the next two phases of Tejon34 at Tejon Street and West 34th Avenue. The new townhome building, called West Courtyard, which is being listed by Red Chair, will have five units ranging in size from 2,177-square-feet to 2,659 square feet and priced from $642,000 to $824,000. They will include two-car attached garages, rooftop decks with city views, high-efficiency furnaces, European-designed kitchens and open basements.
Tejon34’s first phase included five three-bedroom townhomes that sold between $772,918 and $855,000 and ranged in size from 2,935 square feet to 3,097 square feet.
The West Courtyard is slated for completion in the first quarter of 2013.
The homes will meet the latest Energy Star and EPA Indoor Air Program guidelines.
The condo portion is called Tejon North and will have one-bedroom, one-bath condos units priced from $245,000 to three-bedroom, two-bath units for $510,500. The condos range anywhere from 710 square feet to 1,652 square feet. They include attached garages and a community rooftop deck that can be reserved for private gatherings. They are scheduled to be completed by the end of the second quarter of next year.
“With a declining inventory and low-interest rates, the time is right to push forward and provide fresh options in the market,” said River Meadow Managing partner Ray Kawano. “Completing construction as soon as feasible is also better for our existing homeowners.”
Northwest Denver remains one of the strongest areas in the region for real estate investment, according to statistics from Metrolist.
The sales price or properties in the area rose 20.7 percent from June 2011 to June 2012, Metrolist shows, according to Tamburello’s research.
Inventory – particularly new construction – is scarce in northwest Denver neighborhoods, he said.
Inventory in northwest Denver declined by 53.2 between June 2011 and June 2012, according to Tamburello’s analysis of Metrolist data.
Visit Tejon34.com to learn more about the new infill development in Highland.
To see what else is available for sale in Highland, please visit COhomefinder.com.