Denver;
Building activity tumbles
rockymountainnews.com
Residential permits in metro area down 17% through August
By John Rebchook, Rocky Mountain News
October 3, 2003
Residential building activity in the Denver area dropped by nearly 17 percent through August compared with the same period last year, continuing a yearlong downward trend.
A total of 12,066 permits were issued in the first eight months of the year for single-family detached homes, condos/town homes and apartment units in Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas, Elbert and Jefferson counties, according to the report by the Home Builders Association of Metropolitan Denver.
Residential construction, especially for apartments, has been slowing because of the soft economy and overbuilding.
Year-to-date, apartment permits were down nearly 59 percent from last year, with 912 permits issued so far, compared with 2,214 last year.
In August, only 88 apartment permits were issued, all of them in Thornton. That is a 65 percent drop from the 255 permits issued in August 2002, although experts caution it is a mistake to place too much emphasis on one month's data.
As for homes, 8,573 permits have been issued in the first eight months of the year, nearly 10 percent fewer than the 9,495 through August 2002.
"This is not inconsistent with what we have been seeing for most of the year," said Roger Reinhardt, executive vice president of the local HBA. "If you look at where we're at right now, we've built close to 11,200 units through August. We're probably going to end up with about 16,000 units. And we'll probably sell 14,000 units. Simple math will tell you that we will have a 2,000-home inventory of unsold homes. And a 2,000-home inventory spread across a metro area of our size is a reasonable number. That tells me builders are being responsible and building to the market."
Reinhardt said there are a few pockets of overbuilding of luxury homes, but "you can't build the affordable stuff fast enough. What concerns me is that we have a 7 ½-month inventory of unsold resale homes."
Home builders, he said, are competing against individual home sellers more than they are against each other.
The apartment market is in far worse shape, but the drop in construction activity is welcomed by the industry.
"Apartments are a disaster," Reinhardt said. "They have a 13 percent vacancy rate. We're talking about 20,000 empty units. That market has been decimated."
He said low mortgage rates have allowed many renters to buy homes.
Broker Jeff Hawks, principal of Apartment Realty Advisors, said that except in few prime locations, such as along light-rail lines or around downtown Denver, market-rate apartment building construction has just about come to a halt.
"We're probably down 80 percent from where we were at the height (of construction booms) in 1999 and 2000," Hawks said.
Apartment construction probably will continue to be slow for the next two to four years, he said.
"A developer is not able to find financing or an equity partner to build an apartment community today," Hawks said. "The numbers aren't good enough to support new construction."
Building-permit activity
Year Permits*
2003 ......12,066
2002 ......14,524
2001 ......20,098
2000 ......18,490
1999 ......18,205
1998 ......19,584
1997 ......16,204
1996 ......14,025
1995 ......12,461
1994 ......13,270
* Homes, condos, town homes and apartments through August of each year
Source: Home Builders Association of Metropolitan Denver |
