Wednesday, October 17, 2012

Regional Snapshot: Employment and Rental Housing in Northern Colo.

The unemployment rate in the Ft. Collins-Loveland area during August was 6.1 percent. During the same period in the Greeley area, the unemployment rate was 8.3 percent.

The first graph shows that the unemployment rate has been generally declining since the first half of 2010 in both areas. The unemployment rate is at the highest point since at least 1990, and is probably the highest unemployment rate recorded in both area in decades. The unemployment rate peaked at 11.3 percent during  March 2010 in the Greeley area while the unemployment rate in the Ft Collins area peaked during January 2010 at 8.5 percent. These rates are not seasonally adjusted. 

According to the establishment employment survey, employment in the Ft. Collins-Loveland area was up 2.2 percent year over year, and it was also up 2.2 percent in the Greeley area. I have indexed total employment in both regions and graphed them in the second graph.  Ft. Collins employment is now back up to peak employment levels, but employment in the Greeley area is still down about 2 percent from the November 2008 peak. Or, examined another way, Greeley total employment is down about 1500 jobs from peak levels. 

The third graph shows year-over-year changes in total employment in each month according to the household survey. The ft. Collins area experienced no year-over-year losses in employment from the mid nineties up through 2008.  

A similar patters can be seen for the Greeley area in which year over year gains in employment have been almost nonstop, with the exception of a brief period during 1996-1997. In both the Greeley and Ft. Collins-Loveland areas, the job growth pattern is different that what it was in metro Denver where significant job losses occurred during the 2002 recession in Colorado. 

Apartment vacancy rates have declined significantly over the past decade in  both Greeley and in the Ft. Collins-Loveland area. Following a slight uptick durign the 2008-2009 recession, vacancies continued their fall. As of the second quarter of 2012, the vacancy rate in Greeley was 5.4 percent and the vacancy rate in Ft. Collins-Loveland was 3.5. A vacancy rate of 5 percent is fairly low and a rate of 3.5 percent is very low. As can be seen in the graph above, the vacancy rate in Ft. Collins-Loveland since 2007 has tended to be considerably lower than the rate in Greeley, and this is at least partially due to the more robust labor market in Larimer County.

The average rent in northern Colorado has been climbing in recent quarters, but this follows an extended period of flat rents from 2001 to 2006. Greeley rents have only begun to see some real growth since 2011 with the average rent moving up toward $700. Growth in the Ft. Collins-Loveland area has been more robust with the average rent increasing more than $100 to around $1,000 since 2009. As of the second quarter of 2012, the average rent in the Ft. Collins-Loveland area was $996 and it was $662 in Greeley. Keep in  mind that these rents are not adjusted for inflation, so unless rents are rising by 20 percent or more per decade, they have not been keeping up with inflation. Recent growth has been enough to exceed inflation, but rents from 2002 to 2007 or so actually went down in real terms. 

The next graph shows year-over-year changes in rents in both areas. Clearly, growth has been accelerating in the Ft. Collins-Loveland area, and has been generally positive in Greeley. Ft Collins-Loveland is seeing some of the largest increases in rent in recent quarters, and has recently surpassed the Denver metro area as the area with the highest average rent. The average rent in metro Denver during the second quarter of this year was $979. The rent growth trend in the Greeley are has been more volatile and of course is based on much smaller average rents overall. 

Finally, we'll look at trends in building permits in northern Colorado.

Single-family permits in both Greeley and in the Ft. Collins-Loveland area are back at mid-90s levels. Greeley experienced more of a bubble in new home construction due to high population growth and a steady flow of residents looking for affordable home ownership opportunities. from 1994 to 2005, monthly single-family permits grew 325 percent in Greeley.  Single-family construction began to grow earlier in the Ft. Collins area than the Greeley area and from 1992 to 2004, permits grew 175 percent. Single-family permit totals this year, however, are well down from peak levels and are are near 20-year lows. There were 95 permits issued during August 2012 in Greeley and 81 permits issued in the Ft. Collins-Loveland area during the same period.  

Multi-family permitting has been quite different from single-family permitting. There was nothing that one might regard as a significant bubble over the past twenty years in either area. Traditionally, multi-family permitting has been more common in the Ft. Collins-Loveland area than in the Greeley area although both areas experienced significant increases in multifamily activity from the late 90s to 2007 or so. Rent growth in the Ft. Collins-Loveland area is spurring continued multifamily production that is rivaling new production seen during some months of the past decade. Overall production is still moderate compared to the late 90s and early 00s, however. Multifamily production in Greeley, on the other hand is back to mid 1990s levels. Larimer Copunty during 2012 has been one of the more active counties in the state for multifamily production, but multifamily production in the Greeley area during 2012 has been negligible. I expect multifamily production to continue in the Ft. Collins-Loveland area, helped along by a strong job market and continued student demand.