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Home permits up 28%, but flooding demand coming

Highlights:

  • HBA of Metro Denver releases August permit activity.
  • YTD, all permits up 41.7%
  • Flooding will increase demand for housing.
This 5-bedroom, 4-bedroom home with 4,745 square feet in Westminster is on the market for $675,000.

This 5-bedroom, 4-bedroom home with 4,745 square feet in Westminster is on the market for $675,000.

Through August, builders pulled 4,730 permits for single-family detached homes, a 28.2 percent increase from the 3,689 permits issued in the Denver area in the first eight months of 2012.

Homes ravaged by the recent flood will mean a spike in building permits though 2014, although the industry won’t be able to deliver homes fast enough to replace homes lost or damaged, according to one analyst.

The report, released Monday by the Home Builders Association of Metro Denver, showed an even larger percentage gain for townhome permits, which rose to 818 from 575, a 42.3 percent jump.

Permits indicate future construction. The HBA report includes the counties of Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas, Elbert and Jefferson, as well as all the communities in each county.

“This news is good news,” said S. Robert August, a Denver housing consultant.

“There is still a lot of pent-up demand in the metro area,” August added.

He said more permits would have been pulled except that “developers can’t deliver completed lots fast enough.”

One recent projection called for 7,500 new homes to be delivered this year, but because of the lack of lots only 6,500 are likely to be completed, August said.

The flooding in northern Colorado and elsewhere will make it even more difficult to meet the demand for housing, August said.

“First, the flooding was a true tragedy,” August said.

“Builders couldn’t meet the demand before these Biblical rains fell,” August said. “Now, we are going to have this 20,000-house impact to the market.”

The flooding will add to the demand for new homes through next year and builders will do all they can to try to react, but it will be a daunting task, he said.

“There already is a shortage of finished lots, labor and raw materials,” August said. “With the damages and destroyed homes from the flooding, it is going to exacerbate the problem.”

Also, thousands of people who can’t yet return to their homes are in limbo as far as what their next step should be, he said.

“Many people don’t have flood insurance and even if they do, it won’t cover everything,” he said. “And insurance never covers their ground, so they will have to deal with that problem, as they might not want to rebuild on the same site.”

August said that it would be difficult to swap individual home sites for county land, in exchange for turning the home site into open space.

“The problem will be is that one home might be high and dry, while the home next to it is a complete loss, while two homes down another home is partially damaged,” August said.

“An individual lot here and there will be very difficult to turn into open space,” August said.

The HBA report also showed that in the first eight months of the year, there 2,706 permits issued for apartment units, a 64 percent increase from the 2,706 issued in the first eight month of 2012. When all product types are included, permit activity rose 41.7 percent from January through August, compared with the first eight months of 2012.

Much as with homes, apartment developers won’t be able to deliver new units fast enough to meet all the demands from victims of the flood, August said.

“We were expected to deliver something around a total of 12,000 new residential units this year, between homes and apartments,” August said.

“All of a sudden, we have a demand for 20,000 more units that we weren’t anticipating.”

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Have a story idea or real estate tip? Contact John Rebchook at  JRCHOOK@gmail.com. InsideRealEstateNews.com is sponsored by Universal Lending, Land Title Guarantee and 8z Real Estate. To read more articles by John Rebchook, subscribe to the Colorado Real Estate Journal.