- HBA releases July housing data.
- Report shows 43.8 % jump in townhome permits.
- Home permits up 28 consecutive months.
Denver-area townhome construction activity in the first seven months of the year rose 43.8 percent, shows the most recent report by the Home Builders Association of Metro Denver.
That is more than the 34.7 percent year-over-year increase for permits issued in the first seven months of the year for single-family detached homes, according to the HBA report released Tuesday afternoon.
Also, townhomes are a bigger part of the overall “for-sale” housing market than they were last year.
At the end of July, townhomes constituted 17.2 percent of the entire for-sale market, while they represented 13.5 percent of the market a year ago (excluding 104 condominiums issued this year, compared to none in the first seven months of last year).
Permits represent future construction.
There have been 868 townhome permits issued through July in the counties of Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas, Elbert and Jefferson ― and all the communities in those counties ― compared with 488 the year before.
Denver represented by far the largest block of townhome activity.
There were 388 permits issued for townhomes in Denver, or 38.9 percent of the total and about double the 188 in the first seven months of 2012.
“I think we are seeing a pretty good increase coming out of Stapleton,” said Jeff Whiton, CEO of the HBA organization.
“Stapleton is opening their Conservatory Green north of I-70, and it has a pretty large townhome component,” Whiton said.
Actually, Stapleton is responsible for many of the townhome activity, but almost all of it is still taking place south of Interstate 70, said Gene Myers, president of New Town Builders.
He said that Forest City, the developer of Stapleton, ended up with a bit of an oversupply of townhome lots south of I-70.
“They are just starting to be depleted,” Myers said.
“We’re probably going to start pulling permits for Conservatory Green in a week or two,” he said.
He said he believes other builders are in the same boat.
But the trend is certainly a surge in townhome activity, he said.
“I will say that this year will probably be the first year in our history that we will have delivered more townhomes than single-family homes,” Myers said.
He said there is a large pent-up demand among young professionals who have waited longer than normal to buy their first home.
“The same demographic and economic patterns are filling up apartments,” Myers said.
“A lot of people are realizing that with rising rents and interest rates still low, it is cheaper to buy than to rent.”
New Town builds energy-efficient townhomes priced from the low $200,000s.
However, one out of six homes it sells are affordable under Denver’s inclusionary zoning rules.
“For those qualifying for affordable homes, they can buy the exact same unit for about $150,000,” Myers said.
Meanwhile, there were 4,096 permits issued for single-family detached homes through July, compared with 3,040 during the same period in 2012.
“This is the 28th consecutive month that we have outperformed the same month from the previous year,” Whiton said.
He said the market is starting from such a low basis that the market is no where near where it should be, based on historic growth and the size of the market.
“Don’t get me wrong, I am happy where we are,” Whiton said.
“But the lack of completed lots is slowing growth from where it should be,” Whiton said. “It can take two years to bring a lot that is ready to build on to the market.”
That is absolutely correct said Myers, especially for small and mid-sized builders.
“The big builders can go to Wall Street to finance land development, but a company our size needs to depend on developers to prepare the land,” he said.
“In a normal market, we would have 15,000 or 16,000 permits, while we are at about half that amount this year,” he said
In the past 12 months, community banks have begun making construction loans, but they still won’t make loans for land acquisitions.
“Too many of them were burned during the downturn, and now don’t want to be carrying land on their books,” Myers said.
Also, hedge-fun type operations are buying and developing land from Broomfield to Castle Rock, he said.
“Alternative capital is flowing to land,” Myers said.
“I don’t even think I knew what a hedge fund was until we had the great meltdown.”
Both Myers and Whiton said that the Case-Shiller report released yesterday that showed home prices in the Denver area in June were at record levels, bodes well for the new home market.
“It is very significant that resale homes are now selling at even higher prices than they were before the recession,” Whiton said.
“That means a lot of people can either move-up to a bigger home or downsize into an active-adult community,” Whiton said.
An increasingly large number of people want a new home, he said.
“Even though the inventory is growing for resale homes, it is growing from all-time low levels,” he said.
“By historic standards, there are still very few resale homes to choose from,” he said.
Also, new homes are typically far more energy-efficient than older, resale homes, he said.
“Builders are building homes that are far more energy efficient today than they were 10 years ago or even five years ago,” Whiton said.
“New Town Builders, Brookfield, Oakwood Homes, Meritage, Lennar and KB Home, all have very high-efficiency houses right now.”
It used to be that custom homes were leading the charge in energy efficiency.
“Today, most production builders are doing a really good job at providing consumers with extremely energy efficient homes,” Whiton said.
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