Tuesday, February 22, 2011

Building Permits in 2010 near 10-year lows

The total number of building permits issued in Colorado rose from 2009’s low, but permits remained at unusually low levels, with both single-family permits and multi-family permits well below totals reported earlier in the decade.

Single-family permits in 2010 rose 20.9 percent from 2009’s low of 7,484, increasing to 9,050. Nevertheless, 2010’s total is down 77.6 percent from 2005’s peak of 40,430 permits.

Multi-family permits also increased in 2010, rising 18.5 percent from 1,780 permits issued during 2009, to 2,110 issued during 2010. Multi-family permits most recently peaked in 2007 with 8,378 permits and the total number of permits issued in 2010 is down 74.8 percent below the 2007 peak.

As single-family building began to drop off in 2006 and 2007, multifamily began to pick up, but then sharply declined with the deepening of the recession in 2008.

The second chart shows the monthly totals for building permits issued since 1998.

There were 573 single-family permits issued during December 2010. The most active December in recent years for single-family permits was December 2005 when there were 2,780 permits.

There were 439 multi-family permits issued in December 2010. The most active December in recent years was December 2007 when 1,302 multi-family permits were issued.

In recent months, while single-family permits have continued to fall, multifamily permits have shown some signs of life with the largest number of December permits issued since December 2007.

Single-family permits, on the other hand, have dropped to levels not much above the low reached during January 2009 when only 392 single-family permits were issued.

Finally, for a more detailed look at multifamily permits, we can see in chart 3 that the overall volume of new permits being issues in multifamily continues to be quite low.

However, in the four months from September 2010 though December 2010, 1,227 multi-family permits were issued, which is only slightly fewer permits than were issued during the previous 12 months from August 2009 to August 2010, when 1,248 permits were issued.

During 2009 and 2010, there were some months in which almost no multi-family permits were issued in Colorado at all. Permits bottomed out in November 2009 when 5 multifamily permits were issued statewide.

In previous posts, we have discussed the repercussions of such a small amount of new construction in multi-family housing. [See this video. See page 2 of this.] Since permits are a helpful indicator of future construction, it stands to reason that new construction will continue to be at historic lows for the short term, which will in turn drive up rents and keep vacancy rates low.