Tuesday, July 31, 2012

Philly Fed: Leading index for Colorado lags nation, most states

The Philadelphia Fed released its June Leading Index for the 50 states and the nation today. Colorado's index value was 0.0, putting it behind 33 states with higher index values, and behind the US's leading index value of 1.01

The Philly Fed's Leading Index is "a six-month forecast of the state coincident indexes." The most recent analysis of Colorado's coincident index value can be found here.

The coincident index is a general measure of economic activity based on a variety of factors. The leading index is a prediction of future growth in the coincident index (based on salary, employment and housing info), and as of June, Colorado places in the bottom half of states according to the index. 

As can be seen in the graph, Colorado's leading index was occasionally higher than the national index in recent years and has tended overall to track closely with the national index. The Colorado index has fallen below the national index recently, however, signalling that Fed analysts see potential obstacles to economic growth in Colorado.

In short: The Philly Fed's report indicates that the Fed predictionf of economic growth in Colorado has turned negative recently, and if correct, the index signals that Colorado will be lagging the nation in economic growth over the next six months. Indeed, with an index number of zero, the Philly Fed is saying that it expects the coincident index to be flat in Colorado over the next six months.

Buildfax: Remodeling activity in West region up 9 percent

According to Buildfax, home remodeling activity was up 9 percent from May 2011 to May 2012 in the West region, which includes Colorado. Only the northeast reported a larger increase with a 14 percent increase, year over year. Nationally, remodeling activity was up 6 percent.
"Remodeling growth appears to be flattening out, although 2012 looks like it will still be significantly better than 2011," said Joe Emison, Vice President of Research and Development at BuildFax.
See more. 

Corelogic: Colorado has 6th-lowest foreclosure inventory rate

Corelogic released today its June 2012 report on completed foreclosures and foreclosure inventory. According to the report, the foreclosure inventory in the US was 3.4 percent of mortgages during June 2012, which was down 0.1 percent from June 2011.

In Colorado, the foreclosure inventory was 1.4 percent of all mortgages, making Colorado tied for the 6th-lowest foreclosure inventory rate in the nation. Only Alaska, North Dakota, South Dakota,Wyoming and Nebraska had foreclosure invetory rates that were lower. Colorado was tied at 1.4 percent with Missouri, Virginia, Montana, and West Virginia.

Florida had the highest foreclosure inventory rate in the nation at 11.5 percent during June.

Corelogic listed the number of completed foreclosures in Colorado over the past 12 months at 18,898 which compares fairly closely with annual totals collected by the Colorado Division of Housing. There were 19,622 completed foreclosures during the 12 months of 2011.

The Denver-Aurora-Broomfield metro area was again lowest among all metros in its foreclosure inventory during June. 1.4 percent of all loans with mortgages were in foreclosure in the Denver area. In Chicago, the rate was 6.0 percent and in Nassau-Suffolk, New York, the rate was 6.8 percent. 

Directory Reports Colorado Industrial Jobs Increased 1.2% Over Past Year

Press release from Manufacturers' News:

EVANSTON, Ill., July 31, 2012 /PRNewswire/ -- Industrial employment in Colorado increased 1.2% over the past twelve months according to the 2013 Colorado Manufacturers Directory, an industrial directory published annually by Manufacturers' News, Inc. (MNI) Evanston, IL. MNI reports Colorado gained 2,546 industrial jobs between May 2011 and May 2012.

Manufacturers' News reports Colorado is home to 6,553 manufacturers employing 205,627 workers.

"Colorado continues to see its manufacturing sector improve," says Tom Dubin, President of the Evanston, IL-based publishing company, which has been surveying industry since 1912. "The state's business-friendly environment as well as its access to capital and abundant natural resources has been a draw for a variety of enterprises."

Coming Thursday: mid-year foreclosure report

We'll release the mid-year foreclosure report for all Colorado counties on Thursday. Here's a sneak peak:

Foreclosure filings for the first half of this year are up about 3 percent compared to last year. Over the same period, foreclosure sales at auction are down more than 25 percent.

Case:Shiller: Denver home prices up 3.7 percent in May

Case-Shiller released its home price index for May 2012 today. The home price index for the Denver area rose 2.1 percent percent from April to May, and rose 3.7 percent, year over year, from May 2011 to May 2012.  The year-over-year increase in May was the fifth year-over-year increase in a row for Denver, and was the largest increase in 23 months . The first graph shows the index values since 2001. The index value is at the highest value seen since August 2010.

According to S&P's press release, home prices nationwide continued to show some signs of growth:
“With May’s data, we saw a continuing trend of rising home prices for the spring,” says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “On a monthly basis, all 20 cities and both Composites posted positive returns and 17 of those cities saw those rates of change increase compared to what was observed for April. Seventeen of the 20 cities and both Composites also saw improved annual rates of return. We have observed two consecutive months of increasing home prices and overall improvements in monthly and annual returns; however, we need to remember that spring and early summer are seasonally strong buying months so this trend must continue throughout the summer and into the fall.
In year-over-year comparisons for March, Atlanta showed the largest drop, with a decline of 14.5 percent, while the index in Las Vegas fell 3.2 percent. Year over year, home price indices fell in 8 of the 20 cities included in the study. Denver was among the twelve cities reporting increases, and had the fourth-largest increase of the twenty cities. Only Dallas, Phoenix, and Minneapolis reported larger year-over-year increases in the home price index than Denver.

The second chart shows trends in the Case-Shiller index for the Denver area and for the 20-city composite index. It is clear that Denver did not experience the kind of price bubble that occurred in many other metropolitan areas, and consequently, the index has not fallen nearly as far in Denver compared to the larger composite.

The 20-city composite is down 32 percent since it peaked in July 2006, but the Denver index is down only 8 percent from its August 2006 peak.

Although the Denver index showed some significant growth in May compared to May of last year, the Denver index during May was at levels comparable to those found during 2004.

The third chart compares year-over-year changes in the Denver area index and in the 20-city composite. Overall, the index has been less volatile in Denver than has been the case for the 20-city composite. The year-over-year change in the 20-city composite during April was again negative with a decrease of 1.9 percent while Denver reported an increase of 2.8 percent, and also increased  for the five month in a row. In the 20-city index, the year-over-year change has been negative for the past 20 months.

In short: Denver metro home prices are increasing while the national index continues to fall in year-over-year comparisons. 

The last chart provides a closer look at year-over-year changes in the Denver index. The index went negative as the economy began to slow in 2007 and remained negative until this year with the exception of the period in which the homebuyer tax credit pushed up prices temporarily. Recent home price growth is accelerating as inventory declines, household formation continues, and rental housing continues to become more expensive.

Monday, July 30, 2012

Colorado homeownership rate falls during second quarter

The homeownership rate declined in the United States from the second quarter of 2011 to the second quarter of 2012. During the same period, the homeownership rate also declined in Colorado and in the Denver-Aurora metro area.

According to data released on July 27 by the Census Bureau, the national homeownership rate declined from 65.9 percent during the 2nd quarter of 2011 to 65.5 percent during the second quarter of 2012. During the same period, the homeownership rate in Colorado fell from 66 percent to 65.2 percent. In the Denver-Aurora area, the rate fell from 62.9 percent to 62 percent during the same period.

The latest data is based not on the decennial census, but on quarterly estimates made using data from the Current Population Survey. Quarterly data at the state and metro level, using current methods, are only available since 2005. Extrapolating from several different homeownership measures, it looks like homeownership peaked near 72 percent in Colorado in 2003 and has been slowly declining since.

The first graph shows the homeownership rates for the United States and Colorado since 2005. For most of the seven years covered in the graph, the homeownership rate in Colorado is higher than the national rate. During the first quarter of 2010 and the fourth quarter of 2011, however, the Colorado rate dipped below the national rate. While this does not yet establish a trend, it does show a significant drop in the Colorado rate compared to the national rate.As of the second quarter of 2012, the Colorado homeownership rate remains below the national rate.

The relative drop in the homeownership rate could be due to several factors. A decline in homeownership could be due to weakening wages and household wealth, which has led to more mortgage delinquency and more foreclosure. However, recent mortgage delinquency data from the Mortgage Bankers Association and the LPS Mortgage Monitor suggests that Colorado is actually performing better than most of the nation on mortgage delinquencies.

The more likely option would be that new household formation has been robust in Colorado while new home purchase activity has not been robust. The addition of a large number of new renter households at the same time that home purchases decline could lead to a fairly swift decline in the homeownership rate. We do know that household formation has continued at surprisingly high levels in spite of weak job growth with more than 20,000 new household per year in recent years. At the same time, we know that home purchase activity continues to decline as a rate of 1 to 3 percent year over year. We also know that population growth through in-migration added another 30,000 people to the state during 2010.

In short, foreclosure activity has been falling in the state, but new household formation and in-migration has added a significant number of new persons and households. This will push down the homeownership rate if home purchase activity declines.

At mid-year, multifamily permits up almost 200 percent

The Census Bureau released new permit data last week:

Through June 2012 in Colorado this year, building permits issued for multifamily construction were up 198 percent, year over year, while permits issued for single-family construction were up 34 percent for the same period.

During June 2012, 908 multifamily permits were issued in Colorado, and 1,347 single-family permits were issued. During June 2011, there were 170 multi-family permits issued, and 980 single-family permits issued. The first graph shows permit activity for the first six months of the year since 1998. Through June of this year, there have been 5,998 single-family permits and 3,536 multifamily permits issued.

For June alone,  multifamily permits are up 434 percent and singlefamily permits are up 37 percent, compared to June 2011.

The second graph shows that overall,both multifamily and single-family permits continue to move upward with the most recent three months being particularly active in multifamily permitting.

During June 2012, the number of new multi-family permits issued was at a five-year high and far above any other June totals since 2008.

Single-family permits for June were also at a five-year high and actually topped the pre-financial-crisis permit total from 2008. this suggests that even single-family construction is beginning to see some real signs of life for the first time since 2008. 

Once again, multi-family growth trends outpaced single-family growth, and June 2012 was one of the strongest months for multifamily activity in recent years.

Releases of deeds of trust fall in second quarter in spite of record-low interest rates

Today, the Division of Housing released its second-quarter 2012 report on releases of deeds of trust. Since release activity reflects trends in home purchase and refinance activity they can help us identify some trends in demand for home loans.

The report notes that, in general, release activity responds to movements in the mortgage rate in ways very similar to that seen in mortgage refinance activity.

The first graph shows the quarter-to-quarter changes in the 30-yr fixed mortgage rate and in the number of releases. The quarterly data goes back to 2008. Release activity tends to move in the opposite direction of trends in the mortgage rate. In general, the blue line will move above zero following a period in which the green line is below zero. So, after growth in the mortgage rate turned negative during the 4th q of 2008, release activity moved above zero, topping out at a growth rate of more than 50 percent. In other words, a dip in the mortgage rate produced a surge in release activity. A similar phenomenon can then be seen again following the third quarter of 2010, and then again following the third quarter of 2011. Note, however, that the increase in release activity gets smaller after each period of declining mortgage rates. The effect of pushing down the mortgage rate appears to be diminishing when it comes to release activity.

For example, during the second quarter of this year,  during a period of record-low mortgage rates, release activity actually fell from the first quarter to the second (the blue line is below zero):

Note that interest rates are at record-low levels. All things being equal, release activity would be extremely high.  The fact that release activity is so moderate, considering the mortgage rate, implies that factors like tight credit standards, consumer confidence, and weakness in the job market continue to affect real estate activity in the state. 

Home purchase and refinance activity up 10 percent in Colorado during 2012

The number of mortgage loans paid off in Colorado was up 10.2 percent during the first half of 2012  compared to the same period of last year, but activity was down from the first quarter of this year to the second quarter.  According to a new report released today by the Colorado Division of Housing, public trustees in Colorado released a total of 139,859 deeds of trust during the first half of 2012, and there were 126,903 releases during the same period last year.

Typically, a release of a deed of trust occurs when a real estate loan is paid off whether through refinance, sale of property, or because the owner has made the final payment on the loan. Release activity rises as refinance and home-sale activity increases.

For the second quarter alone, releases of deeds of trust increased 20.7 percent to 65,051 from the 53,878 deeds released during the second quarter of last year.  Releases were down 13 percent from the first quarter of this year when there were 74,808 deeds released. The second quarter’s total was the highest total recorded for any second quarter since 2009. 

“Releases dropped off a bit during the second quarter, but overall activity is still up this year,” said Ryan McMaken, spokesman for the Colorado Division of Housing. “With mortgage rates at such low levels, there’s a big incentive to buy or refinance right now, assuming your loan gets approved.”

Following three quarters of falling mortgage rates during 2011, releases reflected new refinance activity and surged during the first quarter of 2012, rising 28 percent from the fourth quarter of 2011. Home sales have also pushed up release activity as sales in Colorado have climbed during 2012.

Trends in release activity were not uniform across the state. Most of the 21 counties surveyed reported increases in release activity from the first half of 2011 to the same period this year. The largest increases were reported in Eagle, Broomfield, and Denver counties where releases increased 29.9 percent, 26.4 percent and 17.8 percent, respectively. Of the six counties reporting decreases in release activity, the largest declines were found in Morgan and Park counties where releases fell 31.6 percent and 14 percent, respectively.

Adjusted for population size, the counties with the largest numbers of releases of deeds of trust were Summit, Douglas and Broomfield counties. The counties with the least activity were Alamosa, Pueblo and Delta counties.

“We see that the counties with the most release activity tend to have either higher median incomes or they benefit from in-demand mountain real estate,” McMaken said. “Either way, it seems that most counties surveyed are following the national trend which is toward more refi activity.” 

Totals for releases of deeds of trust are collected quarterly by the Colorado Division of Housing. This report tracks releases of deeds of trust as reported by public trustees in Colorado. The report includes twenty-one counties which are chosen based on population size and to ensure that as many regions of the state as possible are represented. More than 90 percent of all occupied households in Colorado are within the twenty-one counties chosen.

A deed of trust is similar to a mortgage and is a lien on real property to secure payment of an indebtedness. The deed of trust contains a grant of the property to the public trustee for the benefit of the holder. The deed of trust is released when the debt is paid in full. 

Housing News Digest, July 30

More mortgages paid off in Colorado Some 10.2 percent more home mortgages were paid off in Colorado in the first six months of this year than in the same period of 2011, according to a report today by the Colorado Division of Housing.
Colorado's public trustees released 139,859 deeds of trust in the first half of 2012, versus 126,903 in the same period last year.

Home purchase and refinance activity up 10 percent in Colorado Following three quarters of falling mortgage rates during 2011, releases reflected new refinance activity and surged during the first quarter of 2012, rising 28 percent from the fourth quarter of 2011. Home sales have also pushed up release activity as sales in Colorado have climbed in 2012. Trends in release activity were not uniform across the state.

Local company sells homes for a flat fee DENVER - A new Colorado real-estate agency is offering to sell homes for a flat fee of $1,700 - no matter the value of the home. Telora is a fairly new company in the metro area. Founder Joshua Hunt says he wanted to do something to set the company apart from the array of real estate agents and agencies.

Rebuilding to test covenants after Colorado Springs wildfire COLORADO SPRINGS —Colorado's most destructive wildfire could fan the flames of a new conflagration — an unprecedented test of a subdivision's power to direct rebuilding with covenants. As cleanup from the Waldo Canyon fire begins, officials in the decimated Mountain Shadows community are uneasy about how the neighborhood will look when it rebuilds.

Trulia's Housing Barometer: Tighter Inventory Complicates the Recovery Each month, Trulia's Housing Barometer charts how quickly the housing market is moving back to "normal." We summarize three key housing market indicators: construction starts (Census), existing-home sales (NAR) and the delinquency-plus-foreclosure rate (LPS First Look). For each indicator, we compare this month's data to (1) how bad the numbers got at their worst and (2) their pre-bubble "normal" levels.

Friday, July 27, 2012

National GDP continues to underperform

To keep up with a growing workforce, one hopes for GDP growth in the 2.5-percent range. Second quarter growth was 1.5 percent.

'The the MBA reported yesterday that refinance activity was at the highest level since 2009.'

Calculated Risk has an interesting analysis of recent trends in the mortgage rate and refinance activity. With record low rates, re-finance activity, not surprisingly, is at a three-year high.

On Monday, I'll release the state's report on releases of deeds of trust. Old reports are here. This report acts as something of a proxy index for home sales and refinance activity in Colorado. A deed of trust is released every time a home loan is paid off, which means, releases happen when existing homes are bought or refinanced.

Check back Monday for the report which shows that release activity has fallen off slightly since the first quarter, but is still up year-over-year.

KC Fed: Manufacturing activity in district 'remained modest'

Yesterday, the Kansas City Fed released its report on manufacturing activity for the tenth district, which includes Colorado.

According to the report, overall activity indexes were a mixed bag although the overall outlook remained mildly positive:

The majority of year-over-year factory indexes eased somewhat. The composite year-over-year index edged down from 24 to 20, and the shipments, new orders, and order backlog indexes also fell. The employment index dropped for the third straight month but remained positive, and the new orders for exports index decreased marginally. In contrast, the capital expenditures index increased from 21 to 23, and both inventory indexes also rose.

See the full report here

Thursday, July 26, 2012

Regional Snapshot: Colorado Springs area, mid-year 2012

Mid-year 2012 regional update on Colorado Springs:

Employment in the Colorado Springs area has become sluggish in recent months and the unemployment rate has inched up toward ten percent. During June 2012, there were 2,759 fewer employed persons in Colorado Springs than was the case during June 2011. The unemployment rate climbed to 9.8 percent during June, and the region experienced 6 months in a row of year-over-year losses in employed persons.

The first graph shows the unemployment rate. Colorado Springs has the highest unemployment rate among all metro areas except Pueblo.

The second graph is total employment in Colorado Springs versus total employment statewide. The two have been indexed so they can be compared. We see that the gap between statewide employment and Colorado Springs employment has begun to widen in recent months. As of June 2012, statewide employment is now 3.7 percent below peak levels while the Colorado Springs employment is 7.3 percent below peak levels.

The third graph shows year-over-year growth in recent months. Colorado Springs is compared to employment statewide. Note that Colorado Springs has run opposite to the statewide trend since January, with multiple year-over-year losses while employment increases, year over year, statewide.

Apartment rents and vacancies 

Demand for rental housing continues to grow in the region at a moderate rate. During the second quarter (data as of June 10, 2012), the vacancy rate in Colorado Springs fell to 6 percent from the second quarter of 2011 when the vacancy rate was 6.4 percent. 6.0 percent is one of the lowest vacancy rates reported in the region since 2002. Vacancy rate have not returned to the very low rates we saw during the late 1990s, however.

Rent growth has also continued in the region as a result of declining vacancies. As of the second quarter, the average rent in the Colorado Springs area has increased year over year for the past ten quarters, which is some of the most sustained growth reported since 2001. See here for full info on apartments.

Home prices and Home Sales

The graph below shows both a moving average for home sales closings in Colorado Springs and the year-over-year change in the number of closings. As of April 2012, home sales have inched up slowly over the past six months, moving upward from a ten-year low in the number of home sales that occurred during 2011. April's home sales were up 5.6 percent over April of 2011. We find that this growth rate is not as strong as what we've recently seen in metro Denver, although it does show an established growth trend at this point. See here for more.

The next two graphs show home price indices developed from two difference sources. The first graph shows the Federal Housing and Finance Agency home price index, while the second graph is developed from the Metrolist data posted by the Colorado Association of Realtors. Looking at both graphs we find that Colorado Springs prices increased more 2003 to 2006 than was the case in metro Denver. The subsequent decline in home prices was larger in Colorado Springs than in metro Denver also. According to the CAR numbers, the home price in Colorado Springs, as of April, was down  22 percent from peak levels while the metro Denver index was down about 9.6 percent. In the FHFA index as well, Colorado Springs prices are down by twice as much from peak levels as the metro Denver prices. Home prices inched up in April in Colorado Springs, but have inched downward for much of 2012. Overall, home prices are weaker in Colorado Springs than in the Denver area and in the northern Front Range. See here for more.


Multifamily permits in the Colorado Springs metro area are on track to end 2012 up by about 25 percent compared to 2011. The graph shows permit activity since 1995, and we can see that overall multifamily permit activity was very week over the past decade compared to 1995-2002. Multifamily permit activity, if it tops last year's total of 657 permits, will be the most active year for multifamily permits since 2002, when there were 1,696 permits issued. There have already been 337 multifamily permits issued in the Colorado Springs are through May of this year. Single-family permits, on the other hand are likely to be similar in 2012 compared to 2011. Growth for single-family construction has been growing but at a slow pace. There have been 894 single-family permits issued through May of this year compared to 1,617 permits issued for all of last year. Full permit data here

Foreclosure activity has been declining along the Front Range in Colorado and El Paso County does not appear to be an exception. The graph below shows that since 2008, statewide foreclosure activity and El Paso county foreclosure activity have tracked very closely together. During June 2012, completed foreclosures (foreclosure sales at auction) were down 42 percent from June 2011. In all metros combined, foreclosure sales in June were down 35 percent from June 2011. The overall trend is downward. In foreclosure filings, the event that begins the foreclosure process (not pictured), El Paso county's June total was up 40 percent from June 2011 while the combined metro total was up 13 percent over the same period. Both areas show a declining trend overall, however. Compared to the elevated totals seen during 2009, both measures are down considerably.

The graph shows completed foreclosures:

Slideshow: Colorado Springs vacancies and rents

The Division of Housing today released its vacancy and rent survey for the Colorado Springs metro area. The market continued to show signs of mild tightening in vacancy with some ongoing rent growth. Apartment demand is being somewhat lessened by a weak job market in the region.  Nevertheless, the overall trend is toward a tighter market. The following slide show looks at some recent trends in the apartment market in the region.

As reported today, the apartment vacancy rate in the Colorado Springs area during the second quarter was down to 6.0 percent during the second quarter, falling from 6.4 percent durign teh second quarter of last year and 6.4 percent during the first quarter of this year. the first graph shows that the metro-wide vacancy rate is now at a ten-year low, dropping off from the past decade elevated vacancy rates. The region has not yet returned to the vacancy rates seen before the 2002 dot-com bust however.

The second graph shows the vacancy rates by submarket within the region. The overall trend is downward in vacancies, and we can see that one of the biggest factors in keeping the metro-wide vacancy rate as high we it was through 2007 and 2008 were the very high vacancy rates seen in the Southeast region and the Security/Widefield/Fountain area. We're now starting to see vacancies really fall off in those two submarket, likely being driven by a flight to affordability in apartments.

The third graph shows the overall average and median rents in the Colorado Springs area.  Rent growth was very strong and sustained through 2011, but has moderated in 2012. The growth during the second quarter was 2.3 percent compared to the second quarter of last year.Rents have increased considerably since 2008 in Colorado Springs.

The fourth graph shows the percentage change in the averag rent for the Colorado Springs area. The second quarter's growth of 2.3 percent is a rather moderate rate, and shows some slowing over the past two quarters.  Nevertheless, there has been year over year growth for the past ten quarters which is the most sustained growth we've seen since 2001.

The fifth graph shows average rents broken out by market area. The high-rent areas are the Northwest and Far Northeast areas while the low-rent areas are Southeast, Central, and the Security/Widefield/Fountain areas. The Central region has seen some of the strongest growth in recent years while the Security/Widefield/Fountain area has been largely flat in its rents. Recent declines in vacancies in southern areas of the Colorado Springs are may drive more growth in the future.

The final graph shows economic vacancy and rental losses for the Colorado Springs area. The economic vacancy is physical vacancy plus rental losses. We can see that the trend here is clearly downward. These stats have only been kept since 2003, but it is likely that we're now seeing a return to levels in rental losses and economic vacancy not seen since 2001. The fact that losses fell to an all-time low during the first quarter of 2012 suggest strength in demand for apartments that does not show up in the basic market rent information.

Pending home sales decline in U.S. West region: may be restricted by supply

Pending home sales in the  US rose in April by 8.4 percent, year over year, according to new pending home sales data released today by the National Association of Realtors. According to the press release:

Lawrence Yun, NAR chief economist, said inventory shortages are a factor.  “Buyer interest remains strong but fewer home listings mean fewer contract signing opportunities,” Yun said.  “We’ve been seeing a steady decline in the level of housing inventory, which is most pronounced in the lower price ranges popular with first-time buyers and investors.”

All regions of the country except the West showed gains in pending home sales, year over year.

In the West, pending home sales decreased 1.3 percent from June 2011 to June 2012.  Pending home sales increased 17 percent in the Midwest and also increased in the Northeast and South.

Overall, the numbers are weaker in the West than in the other regions and in the nation as a whole. In Colorado specifically, sales are up in metro Denver and the northern Front Range.  See more.

The graph shows that pending home sales activity has now reached to levels experienced during the final days of the homebuyer tax credits - which here show up as high pending sales numbers during April 2010:

Declines in pending home sales does not necessarily indicate a decline in demand. As NAR points out, pending home sales can be restricted by supply, and we know that supply is limited in the Denver area, if not in other metro areas of Colorado as well.  Other areas of the west may be experiencing similar trends which may be a major factor in the pending homes sales declines across the region.

Colorado Springs apartment vacancy rate falls to 6 percent, rents rise

The average rent in the Colorado Springs metro area rose year over year for the tenth quarter in a row, climbing 2.3 percent during the second quarter to $776. According to a report released today by the Colorado Division of Housing and the Apartment Association of Southern Colorado, the average rent for the region was up from $759 reported during the second quarter of last year, and was also up from 2012’s first-quarter average rent of $754.  

The average rent increased year over year in all sub-markets measured during the second quarter except the Southeast region where the average rent fell 5.1 percent to $638. The average rent increased the most in the Security/Widefield/Fountain region where it was up 7.9 percent, year over year, to $622.  

“The rent growth in the metro area continues, but the rate of increase has fallen off recently,” said Ron Throupe, a professor of real estate at the University of Denver’s Burns School of Real Estate and Construction Management, and the report’s author. “The weak employment situation in the region is not ideal for pushing rents, so we’re seeing some moderation there.”

Average rents for all market areas were: Northwest, $851; Northeast, $755; Far Northeast, $886, Southeast, $638; Security/Widefield/Fountain, $622; Southwest, $783; Central, $738.

The apartment vacancy rate in the Colorado Springs metro area fell to 6.0 percent during the second quarter, falling from last year’s second-quarter vacancy rate of 6.4 percent. This year’s second-quarter rate was also down from the first-quarter rate which was 6.4 percent.

The vacancy rate declined year over year in the Northwest, Far Northeast, Southeast and Security/Widefield/Fountain areas of Colorado Springs, while the vacancy rate increased during the same period in the Northwest, Southwest and Central areas.

The largest decreases in vacancies are found in the Southeast region of the metro area and in the Security/Widefield/Fountain area. In both areas, vacancies rates were often found to be 15 percent or more over the past decade, but in recent quarters the vacancy rate in both areas has fallen below 10 percent.

“The vacancy rate during the second quarter was one of the lowest we’ve seen in Colorado Springs since 2001,” said Ryan McMaken, a spokesman for the Colorado Division of Housing. “The rate is hovering around 6 percent right now, which is significantly lower than the eight-to-twelve percent vacancies we saw regularly from 2003 to 2009.”

Vacancy rates for all market areas were: Northwest, 4.4 percent; Northeast, 6.7 percent; Far Northeast, 4.8 percent, Southeast, 8.8 percent; Security/Widefield/Fountain, 3.6 percent; Southwest, 5.1 percent; Central, 8.0 percent.

Housing News Digest, July 26

Springs vacancy rates fall, rents rise Apartment rental rates in the Colorado Springs area continued to rise in the second quarter, as vacancy rates fell to the lowest level in more than a decade, according to a report released today.
The average rent in the Colorado Springs area rose year-over- year for the 10th quarter in a row, climbing 2.3 percent during the second quarter to $776, shows the  report by the Colorado Division of Housing and the Apartment Association of Southern Colorado,.
The average rent for the region was up from $759 reported during the second quarter of last year. It also was up from 2012’s first-quarter average rent of $754.

Biz: Rent Skyrockets in Metro Denver Rental rates continue to climb to all-time highs in both the Mile High City and in the surrounding suburbs, according to a report released this week by the Colorado Division of Housing and the Apartment Association of Metro Denver. The report paints a picture of a rental market where demand continues to outpace new construction. In fact, the vacancy rate for apartments in metro Denver hasn't risen since 2009, and, specifically in the city of Denver, vacancy rates for apartments haven't been this low since 2001.

Centerline Capital Group Refinances a Multifamily Property in Denver, Colorado Centerline Capital Group ("Centerline"), a provider of real estate financial and asset management services for affordable and conventional multifamily housing, and a subsidiary of Centerline Holding Company (OTC: CLNH), announced today it has provided a $3.92 million Fannie Mae 10-year loan to refinance Amherst Apartments, a multifamily property located in Denver, Colorado.

 New boost in downtown core business According to Sierra Commercial Real Estate, the downtown retail vacancy rate is 19.6 percent, up 7 percent from this time last year. Part of the reason for the uptick is because the data represents available retail space from Cascade to Nevada, Cimarron all the way to Cache La Poudre. So, when large scale businesses move out like Brian & Scott Jewelers which was over 10,000 square feet it takes about five small scale mom and pop stores to prevent an increase in the vacancy rate.

 Is This What a Housing Bottom Looks Like? Another housing report shows that market activity is up considerably from one year ago but easing off of the levels set by a surge of transactions earlier this year. A report Thursday by the National Association of Realtors showed the index of pending home sales, reflecting deals that have gone into contract but haven’t yet closed, fell in June by 1.4% from May, though activity was still above the level of one year ago by 9.5%.

Wednesday, July 25, 2012

New home sales up 50 percent in U.S. West region

New single-family home sales in the U.S. West rose 50 percent from June 2011 to June 2012, and new home sales have increased in the region, year over year, for five months in a row. With five months of sustained year over year growth, new home sales are experiencing some of the msot sustained growth seen since 2004.   According to today's New Home Sales report, released by the Census Bureau,there were 9,000 new home sales in the Western U.S. during June 2012.

The report, which monitors sales activity for newly constructed houses, reported that in the West, new home sales were up from June 2011's 6,000 new homes sold.  Nationwide, sales rose 17.8 percent, rising from 28,000 to 33,000 during the same period.

The first graph shows monthly new home sales totals for each month since 2003.  While new home sales were at a three-year high for the region, they remained down from 2009's recessionary totals.

For the West region:

The second graph shows that new home sales continue to be well below peak levels, although they have begun to slowly move up in recent months. 

New home sales peaked during the spring and summer of 2005 and have generally trended downward since. The number of new houses sold in the United States is down 74 percent since the peak of March 2005, and new home sales in the West have fallen 76 percent since sales peaked in the region during March 2004.

The third graph shows the declines in both US and regional totals in new homes for sale.

The number of new homes for sale has also fallen off considerably. The number of new houses for sale in the West has fallen 77 percent since the total peaked during June 2007, and the same total has fallen 74 percent in the US since the number of new homes for sale peaked in the US during August 2006.

As we see signs of growth in new home sales, the number of new homes being offered for sale continues to decline. This has led to continued declines in inventory.

As a final note, we can also look to the new home inventory. In this case, we calculate inventory by subtracting the number of new home sales in a given month from the number of new homes for sale at the end of the previous month. In the final graph, we see that the inventory is near a ten-year low, and is at 22,000 homes.  This is good news for owners seeking to sell homes since it suggests that fewer new homes are sitting and waiting to be sold, thus diminishing some of the inventory-driven downward pressure on prices. Inventory has also been down in existing home sales, as noted here.

Nationally, the media has noted that national new home sales have declined month over month, but they remain up on the year over year comparisons. In the West region, though, new home sales have been firm this year, and are also up solidly from last year. Of course, last year's numbers were quite small.

Tuesday, July 24, 2012

FHFA: Home prices acccelerate in Mountain region

House prices in May in the Mountain region, which includes Colorado, were up substantially, rising 6.3 percent, year-over-year from May 2011 to May 2012. Nationally, the house price index rose 3.8 percent over the same period. The new house price index numbers, released today by the Federal Housing and Finance Agency, also showed that the national index is down 16.2 percent from the peak level reached in June 2007, while the Mountain region's index is down 26.6 percent over the same period.

The FHFA monthly index is calculated using purchase prices of houses purchased with loans that have been sold to or guaranteed by Fannie Mae or Freddie Mac. It is a repeat-sales index similar to the Case-Shiller index, but limited to GSE loans.

May's year over year increase is the fourth monthy increase in a row this year following more than four years of monthly declines.

The second graph shows each month's house price index compared to the same month a year earlier:

This report is just the latest home price index showing accelerating growth in home prices in the US and regionally.

Coincident index weakens in Colorado, national index grows

The Coincident Index for Colorado rose 0.09 percent from May 2012 to June 2012, which below the national index's increase of 0.18. . June's index, which was released today by the Philadelphia Federal Reserve Bank, is an index calculated from nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average).

The three-month change in the index, shown in the map here, was smaller in Colorado than in most states. Most states saw an increase in the index while Colorado and seven other states showed declines.

According to the June 2012 report:

The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for June 2012. In the past month, the indexes increased in 30 states, decreased in nine states, and remained stable in 11 states, for a one-month diffusion index of 42. Over the past three months, the indexes increased in 39 states, decreased in nine states, and remained stable in two states, for a three-month diffusion index of 60. For comparison purposes, the Philadelphia Fed has also developed a similar coincident index for the entire United States. The Philadelphia Fed’s U.S. index rose 0.2 percent in June and 0.6 percent over the past three months.

The graph below compares the month-to-month change in both the Colorado Index and the US index. In recent months, the growth rate in Colorado has begun to lag the nation overall.

The second graph shows year-over-year changes in the index, and an upward trend was evident through most of 2011, but now shows signs of falling below national growth rates.

Overall, this report suggests some slowing in Colorado economic activity in relation to the nation as a whole. Nevertheless, the overall trend is one of mild growth.

The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.

Zillow: Pueblo, Grand Junct. home prices fall, other metros rise

According to to most recent Zillow Home Values report, home values as measured by Zillow were up from June 2011 to June 2012 in Denver, Colorado Springs, Ft. Collins and Boulder metros. Prices were down in the Grand Junction and Pueblo metros. The Greeley area was not included in the survey.

Home values in the United States were up slightly in June, increasing 0.2 percent from June 2011 to June 2012. 

The year-over-yerar changes for Colorado metros were:

Change from June 2011 to June 2012:
Boulder +0.2
Colo Springs +1.4
Denver metro +3.5
Ft. Collins +1.9
Grand Junct -0.7
Pueblo -9.3

As can be seen in the graph, in recent years home values have shown the most stability in Boulder, Fort Collins and in Denver metro, and those three metros also have the highest values.

The Zillow home values in June 2012 for each metro area are (in $s): 

US 149,300
Boulder 305,900
Colo Springs 184,700
Denver metro 211,300
Ft. Collins 219,000
Grand Junct. 158,200
Pueblo 97,100

Not surprisingly, Boulder has the highest home value level and Pueblo has the lowest. The largest decline in home values in recent years is seen in the Grand Junction area where home values have declined from about 220,000 to 160,000 since 2007. Price declines in other Colorado metros have been more mild as can be seen in the graph.

This report signals a shift from the May 2012 report which showed year-over-year declines in all metros except Ft. Collins. With this report, most metros now show price increases which further bolsters the perceived overall upward trend in home prices in Colorado.

Zillow home valuations, known as the median "Zestimate valuation" should be taken with a grain of salt, but in this case they do appear to be in line with other home price indices and trends.

Monday, July 23, 2012

Housing News Digest, July 23

Apartment rental rates hit all-time high Average rents in the Boulder/Broomfield market have steadily climbed since the third quarter of 2010, with each of the past seven quarters setting a new record, according to the report. The metro area vacancy rate is 4.8 percent, down from 4.9 percent the past quarter. The joint Boulder and Broomfield county market has the lowest vacancy rate.

Apartment rents in metro Denver rose 7.1 percent during quarter The average rent for apartments in metro Denver rose 7.1 percent from the second quarter of last year to the same period this year, according to a report released Monday by the Colorado Division of Housing and the Apartment Association of Metro Denver. The report said that the second quarter's year-over year growth rate of 7.1 percent was the highest reported during any quarter since the third quarter of 2011, when average rent grew 8.5 percent.

 Average rents up, vacancies down in Denver area “For the next couple of years, we’re going to continue on this trend until construction can deliver some units to catch up,” Hunt said. ARA is tracking about 2,500 units to come online during the rest of 2012 and about 3,500 units to be delivered in 2013, out of approximately 292,000 total apartments.

 Denver-area rents rising The year-over-year growth was the largest annual percentage range since the third quarter of 2011, when the average rent rose by 8.5 percent, shows the report . During the second quarter of this year, the average rent in metro Denver rose $65 to $979 from last year’s second-quarter average rent of $915.

Council to consider 52-unit townhome project west of downtown The Colorado Springs City Council will consider a zone change and development plan this week for a 52-unit Westside townhome development. Uintah Bluffs LLC is requesting approval to build the townhomes on 12.9 acres northeast of Manitou Boulevard and west of Monument Street, bordered by Mesa Road and Dale Street.

Slideshow: 2nd-quarter vacancies and rents in metro Denver

As reported this morning, the vacancy rate in metro Denver is now tied at the lowest vacancy rate seen in any quarter since the first quarter of 2001. The vacancy rate during the second quarter of this year was 4.8 percent. It was 4.5 percent during the first quarter of 2001. The first slide shows the vacancy rate since 2001:

The vacancy rate generally moves upward in response to recessions as demand goes down. Note, however, that in spite of stagnant employment, vacancies continue to decline.

We see that the demand extends to most market areas as well. The second slide shows that few market areas reported vacancy rates above 5 percent during the second quarter. The black bars show the second quarter vacancy for each market area. The red bars are added to show the vacancy from the second quarter of 2010. Numerous markets reported vacancy rates above 7 and 8 percent in 2010, but few areas report significant vacancy this year.

The variations in market areas show up in the county-wide vacancy rates, as seen below. Arapahoe county reported the highest vacancy rate (5.6%) among the Denver metro area counties during the second quarter. This was driven by relatively high vacancy rates in Aurora. The overall trend for all county areas, however is downward.

The economic vacancy, which takes into account rental losses due to concessions and missed payments also is declining.  Economic vacancy (the green bars) are also back to 2002-2002 levels, suggesting continued strength in the multifamily rental market.

Rents continue to climb as demand increases and supply remains somewhat constrained. The next slide shows the year-over-year rent growth for the Denver metro area. The average rent grow 7.1 percent from the second quarter of 2011 to the same period this year. This is the largest rent growth rate since the third quarter of 2001 when the rent grew 8.5 percent. Rent growth was weak during the inter-recession years of 2003-2008. 

 The next slide shows both median rent and average rent for the metro Denver area. Both behave in a similar fashion and have both begun to quickly move upward in recent quarters. The average rent in metro Denver hit $979 during the second quarter, and the median rent hit $916.

The strong demand is partially explained by demographics as households continue to form in the state, and new in-migration continues from out of state. Young entry-level workers continue to regard Colorado as a popular place to move following college graduation. These entry-level workers are a major component of the target market for apartments. 

Nevertheless, the number of new units delivered to the Denver metro market has not been large by historical standards. The final slide shows a four-quarter moving average for new units delivered for metro Denver. Unit totals are still well below what they were in some previous periods.

Rents in metro Denver surge 7.1 percent, largest growth rate in eleven years

The average rent for apartments in metro Denver rose 7.1 percent from the second quarter of last year to the same period this year. According to a report released today by the Apartment Association of Metro Denver and the Colorado Division of Housing, the second quarter’s year-over-year growth rate of 7.1 percent was the largest annual rate of growth reported during any quarter since the third quarter of 2011 when the average rent grew 8.5 percent. During the second quarter of this year, the average rent in metro Denver rose 65 dollars to $979 from last year’s second-quarter average rent of $915.

The average rent increased in all county areas, with Denver county and the Boulder/Broomfield area showing year-over-year increases of 75 dollars and 87 dollars respectively.

“Rents have been showing growth for the past two years, but during the second quarter, they really began to take off,” said Ron Throupe, professor of Real Estate at the Burns School of Real Estate and Construction Management at the University of Denver, and the report’s author. “If you drill down into the numbers you find some even more dramatic growth such as the 99-dollar increase in efficiency rents.”

The average rent in efficiency apartments in metro Denver increased from $674 during the second quarter of last year to $773 during the same period this year. The highest rents at the county level were found in Douglas County where the average rent rose to $1,131 during the second quarter. The lowest rent at the county level was found in Adams County where the average rent rose to $906 during the second quarter.

Average rents for all counties were: Adams, $906; Arapahoe, $956; Boulder/Broomfield, $1,091; Denver, $1005; Douglas, $1,131; and Jefferson, $919.

Rents rose as property owners responded to falling vacancy rates across the metro area.

The apartment vacancy rate in the Denver metro area fell to 4.8 percent in the second quarter of 2012, which is unchanged from 2011’s second-quarter rate, and is tied for the lowest vacancy rate seen in any quarter since the first quarter of 2001. The vacancy rate also fell from 2012’s first quarter rate of 4.9 percent.

The vacancy rate has consistently dropped in year-over-year comparisons over the past two years. The metro Denver vacancy rate has not risen year over year since the third quarter of 2009.

“You have to go back to the days of the dot-com boom to see lower vacancy rates than what we’re seeing right now, said Ryan McMaken, spokesman for the Colorado Division of Housing. “The demographics point toward growing demand, and even through developers are looking to build new units, not that many units have been delivered yet.”

Of the 37 submarkets measured by the survey during the second quarter, 26 of them reported vacancy rates below 5 percent. Traditionally, a vacancy rate below five percent indicates a tight market. The submarkets reporting higher vacancy rates tended to be on the eastern side of the metro area including various parts of Aurora and southeast Denver.

2012’s second-quarter vacancy rates by county were Adams, 4.9 percent; Arapahoe, 5.5 percent; Boulder/Broomfield, 3.6 percent; Denver, 4.8 percent; Douglas, 3.9 percent; Jefferson, 4.0 percent.

Friday, July 20, 2012

FNC: Denver home prices down 1 percent in May 2012

After six months of year-over-year gains in home prices, the FNC home price index fell one percent in May 2012 when compared to May of last year.

The 30-city composite index also fell, dropping 1.8 percent, and continuing a long trend of declining year-over-year price declines since 2007.

The first graph shows the Denver area compared to the 30-city index:

Compared to the 30-city index, price movements in the Denver area have been much more mild, and year-over-year price increases have been seen since the end of 2011. The second graph shows the year-over-year change in the Denver index from FNC.

FNC's data for May conflicts with the Corelogic trend for Colorado which showed a 5.7 percent increase for the state during May. State data tends to reflect metro Denver trends. Case-Shiller's index for May has not yet been released (but will be out July 31). Taking several home price indices together, however the trend appears to be up going into summer 2012.

The FNC indexes are hedonic price indexes using a blend of sold homes and real-time appraisals.

Colo. unemployment rate now even with national rate

The Bureau of Labor Statistics today released employment information on all states for June 2012.The seasonally-adjusted unemployment rate for Colorado during June was 8.2 percent.

According to the BLS press release:

Twenty-eight states and the District of Columbia reported statistically significant unemployment rate decreases from June 2011, the largest of which occurred in Nevada (-2.2 percentage points), Florida (-2.1 points), and Michigan and Mississippi (-2.0 points each). New York experienced the only statistically significant over-the-year increase in its unemployment rate (+0.7 percentage point).
Colorado was one of the states that reported decreases in the unemployment rate, year over year. The seasonally-adjusted unemployment rate in Colorado fell from 8.4 percent during June 2011 to 8.2 percent during June 2012.

Colorado's unemployment ranking has worsened somewhat compared to other states. Last December, for example, Colorado had the 25th-best unemployment rate, but has since fallen to 34th-best.  In other words, only 15 states have unemployment rates higher than Colorado's.

Ending a multi-year trend, Colorado no longer had an unemployment rate below the national rate during June. Both the US and Colorado had an unemployment rate of 8.2 percent during June.

The graph shows a comparison between the two rates since 2006:

The unemployment rate in Colorado, seasonally adjusted, rose to 8.2 percent during June from May's rate of 8.1 percent.  The rate had been flat at 7.8 percent for January, February and March of this year. The national rate was flat at 8.2 percent from May to June.

See here for metro area unemployment info in Colorado.

Over time, if the unemployment rate moves above the national rate, that could affect worker perceptions of the job market in Colorado an impact demographic trends.