Wednesday, October 31, 2012

Census: Rental vacancies head down in Colorado and Denver-Aurora

According to the Census Bureau, the vacancy rate in rental housing in Colorado fell year over year during the third quarter of 2012 to  6.4 percent. In the Denver-Aurora area, the vacancy rate during the third quarter also fell year over year to 4.6 percent. In both cases, the vacancy rates are at the lowest rates recorded during the third quarter in more than seven years.

Nationwide, the rental vacancy rate was 8.6 percent during the third quarter of 2012.

The vacancy rate in both Colorado and in Denver-Aurora are now near 7-year lows (the report has only been published since 2005), reflecting ongoing demand for rental housing as credit for purchase housing has tightened in recent years. Continued household formation in Colorado has also helped bring the vacancy rate down.

Vacancy rates in Colorado and the Denver-Aurora area are lower than the national vacancy rate overall.

These low rates echo the Division of Housing's vacancy survey which shows vacancy rates near 12-year lows. See here for more.

In both the Denver-Aurora area and statewide, vacancy rates have fallen steadily since 2009.

As Colorado's vacancy rate moved further below the national rate, the most recent data further suggests that rental housing in Colorado and the Denver area is experiencing greater demand than is the case nationwide. This is likely due to strong population growth and household formation in Colorado relative to many states and metro areas.

The census vacancy rate also measures vacancies in both single-family units and apartments. The Division of Housing issues separate reports for apartments and single-family rentals.

These vacancy rates are part of the Census Bureau's Housing Vacancy Survey (HVS). The method for data collection varies significantly form the method used for the collection of the Division of Housing's vacancy and rent surveys.

The Division of Housing's report is based on quarterly surveys that measure the vacancy of all surveyed units in specific dates for each quarter. Units are either vacant on the day in question, or they are not. By contrast, vacancies in the HVS are measured according to occupancy of a unit over a much broader time period, and are subject to some interpretation on the part of the person conducting the survey.

Nonperforming loans decline in Mountain Census region

According to second-quarter data on nonperforming loans, available from the Federal Financial Institutions Examination Council (FFIEC), the percentage of commercial and total loans that were nonperforming was down during the second quarter of this year.

In small, medium and large banks, the proportion of loans that were nonperforming fell. Among total loans, however, the proportion was considerable higher than was the case among commercial loans only. Separate stats on residential loans only were not available, so the fact that commercial loans and total loans diverge, suggests that residential loans are experiencing a higher degree of delinquency than commercial loans.

The graph shows that nonperforming loans have been generally declining as a percentage of all loans since 2011. During many quarters of recent years, we can also see that nonperforming loans were more common among total loans than among commercial loans only. In mane cases, nonperformance was almost twice as common among total loans. 

Following significant declines in the nonperformance rate, during the second quarter of this year, nonperformance in big banks was at 2.55 percent for total loans, and it was 1.7 percent for commercial loans only. In medium-sized banks, the nonperformance rate for total loans was 3.49 percent while it was 1.72 percent in commercial loans. 

The year over year nonperfomance rates (%)
Institutions                             2Q 2011    2Q 2012
Medium banks, all loans         6.31          3.49
Medium banks, comm loans   3.37          1.71
Large banks, all loans             4.11          2.55
Medium banks, comm loans   1.94          1.70

(Small banks showed similar declines and divergence between residential and total loans.) 

Since the financial crisis, the anecdotal evidence has consistently pointed toward a situation in which commercial loans foreclose at a much lower rate than residential loans. "Extend and pretend" was said to be much more prevalent among commercial loans than residential loans in order to keep revenue streams going, even if at reduced levels. The state experienced very few foreclosures among apartment building, for example, compared to single-family foreclosures.

As used here:
Small banks = banks with assets up to $300 mil
Medium banks = banks with assets between $300 mil and $1 bil
Large banks = banks with assets of $1 bil to $10 bil

Housing News Digest, October 31

Fort Collins home prices jump 7 percent The average sales price of Fort Collins-area homes rose 7 percent compared to August last year, according to Dave Pettigrew of Prudential Rocky Mountain Realtors in Fort Collins, who tracks monthly sales and sales prices. The $255,940 average selling price for homes this year is the highest on record, ahead of the $253,406 at the height of the market in 2007.

  Apartment vacancy rate low, rents high DENVER - It's never been so good for the landlords of apartments in Boulder and Broomfield counties, as the vacancy rate for the area has dropped to historic lows and rents have climbed to new highs. The Apartment Association of Metro Denver and the Colorado Division of Housing released their third-quarter report on rents and vacancy rates Monday.

  Denver metro apartment vacancies fall; rents rise Lauren Brockman, a principal in Allied Realty, which manages and develops rental property in several states, including Colorado, said that from about 2000 to 2011 a combination of factors all but halted apartment construction in the Denver area, including the dot-com bust and the financial crisis. "We were almost static for almost 10 to 11 years," constructing less than 1,000 rental units a year, he said.

  Denver apartment vacancy rate hits 12-year low There hasn't been this low a percentage of apartments available in metro Denver for 12 years, according to a Vacancy and Rent Survey released Monday by the Apartment Association of Metro Denver.

  Northern Colorado real estate rebounds, commercial playing catch-up Residential real estate is rebounding to healthy levels in Larimer and Weld counties but commercial real estate still has a way to go. More than 300 people attended the annual Northern Colorado Real Estate Conference sponsored by CSU’s Everitt Real Estate Center on Wednesday, listening to industry experts assess the past year and predict the future.

Tuesday, October 30, 2012

Douglas and El Paso counties most active for single-family permits in 2012

Of the 8,255 new single-family permits issued during the first nine months of 2012, more than one-third of them (36 percent) were issued in El Paso and Douglas counties alone. According to new single-family September permit data by county, released by the Census Bureau, the counties with the largest numbers of single-family permits issued during the first six months of 2012 were El Paso, Douglas, and Larimer, Arapahoe, Weld and Denver counties. El Paso County reported more single-family permits than any other county with 1,783 permits.

See here for recent posts about building permits.

New single-family permits during January-September 2012
El Paso 1,783
Douglas 1,253
Larimer  835

Adams 544
Arapahoe 727
Boulder 201
Broomfield 82
Chaffee 77
Denver 773
Elbert 33
Jefferson 615
Mesa 265
Park 57
Pueblo 133
Routt 38
Teller 26
Weld 781

(Note: All permits discussed in this article are single-family permits.)

However, when permit totals are adjusted to the number of existing housing units in each county, the counties with the largest amounts of permit activity were Douglas, Weld and Chaffee counties.These three counties have reported the highest permitting rate for several months.

New single-family permits per household (x.001):

Douglas 12.3
Chaffee 10.9
Weld 8.7
Park 8.3
El Paso 7.9
Larimer 7.2
Mesa 4.5
Elbert 4.1
Broomfield 4.0
Routt 3.8
Adams 3.4
Arapahoe 3.2
Teller 2.9
Jefferson 2.8
Denver 2.8
Pueblo 2.1
Boulder 1.6

During the first nine months of 2012, the metro counties with few new single-family permits relative to the size of the existing stock are Pueblo, Jefferson, Denver, and Boulder counties.

It is also helpful to see which counties have shown the largest increases and decreases in permit activity. In the list below, we see that comparing January-September 2011 to January-September 2012, several metro counties reported year-over-year increases of 50 percent or more. No metro counties reported decreases.

Largest increases among metro counties:

Douglas 74 percent
Jefferson 74 percent
Weld 63 percent
Denver 46 percent

Smallest increases among metro counties:
Boulder 41  percent
Adams 29 percent
Mesa 21 percent

Larimer 48 percent
Broomfield 0 percent
El Paso 49 percent
Pueblo 0 percent
Arapahoe 50 percent

The State of Colorado NSP1 and NSP3 Q3 2012 Quarterly Reports are available to the public online

The State of Colorado NSP1 and NSP3 Q3 2012 Quarterly Reports are available to the public online:

Colorado NSP1 QPR 2012 Q3

Colorado NSP3 QPR 2012 Q3 

Almost half of multifamily permits this year have been issued in Denver

Year-to-date through September of 2012, 47 percent of all new multifamily permits issued have been issued in Denver county alone.

According to new multifamily permit data for Colorado counties, 6,453 multifamily permits have been issued from January through September of 2012. 3,075 of them, or 47 percent, were issued in Denver. Adding in Broomfield, Douglas, and El Paso Counties, we find that 76 percent of multifamily permits this year come from just those four counties.

Arapahoe, Boulder, and Larimer counties have also been active counties this year for multifmaily permits, and few other counties have reported many multifamily permits.

Downtown Denver and the northwest corridor of the metro area, which includes Broomfield, have reported significant rent growth in recent years, and developers appear to be capitalizing on high demand in those markets. El Paso County continues to build following a decade of very little building, while Douglas County has some of the few suburban markets seeing significant amounts of building right now.

Total multifamily permits issued, Jan-September 2012
Adams 220
Arapahoe 470
Boulder 349
Broomfield 668
Denver 3,075
Douglas 590
El Paso 597
Jefferson 40
Larimer 409
Mesa 7
Pueblo 0
Weld 28

With so little demand for new condominiums right now, it is safe to assume that the lopsided majority of new multifamily permits being issued are for rental housing. The apartment vacancy rates in Colorado continued to decline into the third quarter, and this will lead to sustained demand for additional construction.

Change since 2011

Some counties saw very large increases in the number of multifamily permits issued. From January-September of 2011 to the same period this year, in Douglas County, multifamily permits increased more than 3,300% from 17 to 590, while in Adams county they increased from 0 to 220. Boulder County also saw a big increase (926%) with a rise in multifamily permits from 34 to 349, year over year through September, and Broomfield saw the largest increase from 0 multifamily permits to 668 permits, year over year through September.

There was no multifamily permit activity at all in Pueblo County over the period, and Weld County increased only slightly from 0 to 28.

Census: Building permits in Colorado up in 2012, almost back to 2008 levels

Through September 2012 in Colorado this year, building permits issued for multifamily construction were up 113.2 percent, year over year, while permits issued for single-family construction were up 37.8 percent for the same period. 

During September 2012 alone,  142 multifamily permits were issued in Colorado, and 1,342 single-family permits were issued. This is a huge decline in multifamily permits from August 2012, when 1,259 multifamily units were permitted. History has shown however, that multifamily permits are prone to large swings from month to month. 

During September 2011, there were 337 multi-family permits issued, and 821 single-family permits issued. The first graph shows permit activity for the first nine months of the year since 1999. Through September of this year, there have been 10,021 single-family permits and 5,803 multifamily permits issued.

For September alone,  multifamily permits are down 57 percent and single-family permits are up 63 percent, compared to September 2011.

The first graph shows cumulative totals through September of each year: 

The second graph shows that multifamily permits dropped off significantly in September following several months of robust growth. There is not necessarily a new trend being established here since MF permits are volatile. Single-family permits, however, tend to have a more reliable seasonal pattern. Single-family permits were fairly resilient for a September total and continue to show growth over recent years' activity. 

During September 2012, the number of new multifamily permits issued fell after a very strong August, when multifamily permits hit a decade-long high. Total multifamily permits for September were at the lowest level recorded since February of this year. 

Single-family permits for August were 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.  

In this report, single-family permitting has behaved as expected, showing slow ongoing growth. Multifamily permitting, on the other hand, was down following the huge month of August, but total year-to-date totals show a continuation of the trend in which overall activity this year is up by 100 percent or more when compared to last year. 

The third quarter's report on apartment vacancies and rents in the metro Denver area suggest that demand for apartments continues to be strong, which is likely to lead to continued multifamily construction, at least in the short term. 

Case Shiller: Denver area home prices up for eighth month in a row

Case-Shiller released its home price index for August 2012 today. The home price index for the Denver area rose 0.5 percent percent from July to August, and rose 5.5 percent, year over year, from August 2011 to August 2012.  The year-over-year increase in August was the eighth year-over-year increase in a row for Denver, and was the largest increase since January 2002. The first graph shows the index values since 2001. The index value is at the highest value seen since November 2007.

 According to S&P's press release, home prices nationwide continued to show some signs of growth:
““Home prices continued climbing across the country in August,” says David M. Blitzer, Chairman of the Index  Committee at S&P Dow Jones Indices. “Nineteen of the 20 cities and both Composites showed monthly gains  in August. Seventeen cities and both Composites posted positive annual returns in August 2012. In 18 cities and  both Composites annual rates improved in August versus July. Dallas’ rate remained unchanged at +3.6% and  Chicago worsened slightly from a -1.0% annual rate in July to a -1.6% annual rate in August.  
In year-over-year comparisons for August, three out of 20 cities showed year-over-year declines in the home price index.  Atlanta showed the largest drop by far, with a decline of 6.1 percent, while the index in New York fell 2.3 percent. Denver was among the seventeen cities reporting increases, and had the fifth-largest increase of the twenty cities. Only Detroit, Phoenix, Miami, 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 29 percent since it peaked in July 2006, but the Denver index is down only 4.8 percent from its August 2006 peak.

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 June turned positive for the third time in 23 months.

In short: Denver metro home prices have shown a stronger growth trend than the 20-city composite.

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. We must go back to January 2002 to find a larger year-over-year growth rate. The index grew by 5.7 percent from January 2001 to January 2002.

BLS: Unemployment rates in southern and western Colorado metros still above national rate

The BLS released its report today on September unemployment in 372 metro areas in the US. The data for Colorado is not different from the statewide report already released by the Colorado Department of Labor and Employment. The chart with local unemployment rates is here.

Nevertheless, the report does provide some comparisons with other metro areas in the nation. The map on the last page of the report shows that among the metro areas in Colorado, Greeley, Grand Junction, Pueblo, Colorado Springs and Grand Junction have unemployment rates (not seasonally adjusted) above the national rate of 7.6 percent (not seasonally adjusted). During September 2012, Denver Boulder, metro Denver and the Ft. Collins-Loveland area had unemployment rates below the national rate.

The map shows how most metro areas are now above the national unemployment rate.

The map:

Statewide, Colorado's unemployment rate (seasonally adjusted), at 7.4 percent is slightly below the national rate, and has generally been below the national rate since 2005.

The Boulder and Fort Collins areas have posted better unemployment rates than the nation for quite some time. Denver has dropped below the national rate in recent months.

National comparisons remain important insofar as perceptions of the local job market drive household creation in Colorado. As long as Colorado is perceived as being a better job market than many metro areas in the nation, such a perceptions will foster household creation and population growth in the state. In recent months, however, a disparity has grown between two parts of the state. The unemployment rates in Larimer County and in Metro Denver and Boulder have remained relatively low, while rates have been considerably higher in southern and western Colorado. See the housing snapshot archives for details.

According to today's BLS report:

Unemployment rates were lower in September than a year earlier in 345 of the 372 metropolitan areas, higher in 22 areas, and unchanged in 5 areas, the U.S. Bureau of Labor Statistics reported today. Two areas recorded jobless rates of at least 15.0 percent, while 41 areas registered rates of less than 5.0 percent. Two hundred sixty-seven metropolitan areas reported over-the-year increases in nonfarm payroll employment, 94 reported decreases, and 11 had no change. The national unemployment rate in September was 7.6 percent, not seasonally adjusted, down from 8.8 percent a year earlier.

KC Fed: Manufacturing activity in district 'declined slightly'

The Kansas City Fed released its October manufacturing index report last week. According to the report, manufacturing activity in the Fed's Tenth district, which includes Colorado, declined and that expectation for future activity "fell considerably."

According to the release:

The Federal Reserve Bank of Kansas City released the October Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity declined slightly in October, and producers' expectations for future activity fell considerably but remained slightly positive.

LPS: Colorado home prices up 4.5 percent in August 2012

According to the LPS Home Price Index for August, released last week, the LPS Home Price Index for the Denver area was up 5.7 percent from August 2011 to August 2012. According to the report, the estimated home price in the Denver area was $244,000 during August 2012, up from $231,000 during August 2011.  The Denver price was the 12th-highest average price among the 25 cities surveyed. In Denver, the HPI price peaked during Jun of 2006.

Nationally, the HPI rose 2.6 percent from August 2011 to August 2012, rising to $205,000. Nationally, the HPI peaked during June of 2006.

Denver also reported the 9th largest percentage increase over the year of the 25 metros. The largest increases were found in Phoenix and Detroit where the HPI increased 16.9 percent and 11.8 percent, respectively.

The report also provided home price estimates for the largest 20 states. Colorado's HPI increased 4.5 percent from August 2011 to August 2012. The average home price as of August 2012 was estimated at $241,000 in Colorado.   Colorado reported the fifth-largest increase in the HPI among the 20 largest states. The largest increases were found in Arizona and Michigan where the HPI increased 14.1 percent and 7.7 percent, respectively. Colorado had the 9th-highest estimated home price among the 20 states.

This report shows few surprises when compared to other home price indices for Denver and Colorado. (See recent analyses of home prices here.) The Denver area has consistently shown larger increases in home prices compared to numerous other metros throughout the nation, and home price growth has accelerated in metro Denver and in Colorado statewide over the past 6 to 9 months.  

See here for the home price archives.

Monday, October 29, 2012

Slideshow: Third quarter 2012 vacancies and rents

Today the Apartment Association of Metro Denver released the Metro Denver Apartment Vacancy and Rent Survey for the third quarter of 2012. The report showed that the vacancy rate in the metro Denver area continues to decline as rent growth remains solid.

The first graph shows that the vacancy rate (4.3 percent) in the metro Denver area is now at a 12-year low and is at the lowest level since the third quarter of 2000 when the vacancy rate fell to 3.7 percent. The vacancy rate in metro Denver has rarely fallen below 3.7 percent, and that happened only twice in the past 30 years. The vacancy rate hit 3.7 percent during the third quarter of 1994 and the third quarter of 1982. The vacancy rate during the third quarter of 2012 was down significantly from the vacancy rate reported during most quarters of the past decade. The rate was 4.9 percent during the third quarter of last year. 

As the metro-wide vacancy rate declined, the vacancy rates in all metro counties continued to decline as well. The second graph shows that all county areas have shown a downward trend in vacancy rate in recent quarters. Arapahoe County has shown some of the highest vacancy rates in recent years, but even in Arapahoe County, the vacancy rate fell to 4.8 percent during the third quarter. With a vacancy rate of 2.9 percent in the Boulder/Broomfield area, vacancy rates across the board have been heading down. 

The average and median rents moderated somewhat during the third quarter, but both the median and average rent have grown considerable in recent quarters. The pace of increase in the average rent over time has increased since 2009. From 2010 through the third quarter of 2012, the average rent has grown by 3.4 percent. From 2002 to 2009, however, the average rent grew by 1.5 percent. Neither period rivals the late 90s, however when the average rent grew by more than 5 percent from 1996 to 2001. 

The year-over-year growth in the average rent is now approaching levels not experienced since the 1990s and the dot-com boom. As can be seen in the fourth graph, year-over-year growth during the late 1990s was very robust, and was weak from 2002 through 2009. Since then, however, rents have begun to post solid gains, although is not yet clear if rent growth will actually return to the levels experienced  during the late 90s.

The last graph shows that Economic vacancy in Colorado is down by more than 30 percent from peak levels experienced during 2004. As of the third quarter of 2012, economic vacancy was at the lowest level since the third quarte rof 2001 when it fell to 13.2 percent. Economic vacancy is the physical vacancy plus concessions and write-offs. The decline in the economic vacancy suggests that in addition to a decline in physical vacancy, the use of concessions is falling as well to lower levels than has been seen in a decade.

Metro Denver apartment vacancies fall to lowest rates since tech boom

The apartment vacancy rate in the Denver metro area fell to 4.3 percent in the third quarter of 2012, dropping to the lowest vacancy rate recorded in any quarter since the third quarter of 2000. According to a report released Monday by the Apartment Association of Metro Denver and the Colorado Division of Housing, the apartment vacancy rate was down from 2011’s third-quarter rate of 4.9 percent, and was also down from this year’s second quarter rate of 4.8 percent.

For the past twelve quarters, the vacancy rate has fallen when compared to the same quarter one year earlier. The last time the quarterly vacancy rate rose year over year was during the third quarter of 2009.

From the third quarter of 2011 to the same period of 2012, the vacancy rate dropped in Adams, Arapahoe, and Jefferson counties, and in the Boulder/Broomfield area. The vacancy rate rose in Douglas County and was flat in Denver County during the same period.

“Considering that we were already under five-percent vacancy, this additional drop is significant,” 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. “Rent growth hit an eleven-year high during the second quarter, but there is still enough demand out there to keep filling up units.”

Industry observers also noted that supply continues to be a factor.

"The real driver now is the lack of apartment supply, since in the last ten-year cycle, only 18,000 units were built," said Mark Williams, Executive Vice President of the Apartment Association of Metro Denver. "In the two previous ten-year cycles, dating back to the eighties, 50,000 units were built in each cycle, and only 9,000 units are under construction now."

As vacancy rates moved down, the area’s average rent increased. During the third quarter of 2012, the average rent in metro Denver rose to $986, increasing 5.2 percent, or $49, from 2011’s third-quarter average rent of $936.

The average rent rose in all counties measured except Adams County, with the largest increases found in Arapahoe County in the Boulder/Broomfield area where the average rents grew year over year by 7.1 percent and 8.1 percent, respectively. The county areas with the highest average rents were Douglas County and the Boulder/Broomfield area where the average rents were $1,140 and $1,115, respectively. Adams County reported the lowest average rent at $893.

“The average rent has grown year over year in every quarter for the past two and a half years, and it has recently begun to accelerate.” said Ryan McMaken a spokesman for the Colorado Division of Housing. “The rent growth we’re now seeing is starting to look like what we experienced in the days of the dot-com boom.”

2012’s third-quarter vacancy rates by county were Adams, 4.2 percent; Arapahoe, 4.8 percent; Boulder/Broomfield, 2.9 percent; Denver, 4.3 percent; Douglas, 4.1 percent; Jefferson, 3.7 percent.

Average rents for all counties were: Adams, $893; Arapahoe, $956; Boulder/Broomfield, $1115; Denver, $1015; Douglas, $1140; and Jefferson, $949.

The Vacancy and Rent Surveys are a service provided by the Apartment Association of Metro Denver and the Colorado Department of Local Affairs’ Division of Housing to renters and the multi-family housing industry on a quarterly basis. The Colorado Vacancy and Rent Survey reports averages and, as a result, there are often differences in rental and vacancy rates by size, location, age of building, and apartment type. The full report is available through the Apartment Association of Metro Denver at; and limited information is available online at the Division of Housing web site: 

Wednesday, October 24, 2012

Corrected: Unemployment declines in all metros but Pueblo

Note: There were originally errors in both charts below on peak levels and the NSA unemployment rate. They have been corrected. 

Total employment growth in Colorado in September continued to show slight growth statewide in the year-over-year comparisons. In September, total employment in Colorado was down 89,000 from the July 2008 peak. Employment trends in various regions of the state differ, however, so this article looks at which regions of the state have the highest unemployment rates, and which regions have recovered the most in their labor markets. 

Regional employment trends can also provide us with some insights into local housing demand since, all things being equal, those areas with the most robust labor demand will also have the strongest demand for housing. This would be reflected in apartment vacancy rates and in median home price and home sales transactions, among other indicators. 

The first graph compares unemployment rates in Colorado's metro areas.

The regional unemployment rates (not seasonally adjusted) for September 2012 are:
Colorado Springs, 8.7%
Denver-Aurora, 7.4%
Fort Collins-Loveland, 5.8%
Grand Junction, 8.1%
Greeley, 7.9%
Pueblo, 10.1%
Statewide, 7.4%

Since mid-2009, The Fort Collins-Loveland area has consistently shown one of the lowest unemployment rates while Grand Junction and Pueblo have generally shown the highest rates.during recent months, however, The Colorado Springs are has moved into second place behind Pueblo for the highest unemployment rate while Grand Junction has fallen again. The Greeley area showed a big drop in its unemployment rate from 8.8 percent to 7.9 percent, year over year. 

The unemployment rate decreased in all metro areas except Pueblo where the unemployment rate increased from 9.9 percent to 10.1 percent, year over year. 

To provide some additional context, we can look to see how far below total employment levels are below the most recent peak in employment in each region. The peak time differs in each region. For example, the labor market peaked in mid-2007 in the Colorado Springs area, but it did not peak until late 2008 in the Grand Junction area. 

The following numbers reflect how far below the most recent peak are the September 2012 employment totals: 

Colorado Springs MSA, 8.2%
Denver-Aurora MSA, 3%
Fort Collins-Loveland MSA, 0.5%
Grand Junction MSA, 8.4%
Greeley MSA 1.4%
Pueblo MSA, 1.5%
Statewide, 3.4%

All things being equal, the areas further below the peak have recovered the least from initial job losses. The noticeable exception is Pueblo where total employment is nearly back to peak levels, but the unemployment rate is being kept up by a growing labor force that is unable to find employment. Most other regions are experiencing very little growth in labor force, or even declines. See here for more on Pueblo. 

For the first time since the recession, Colorado Springs is further below peak levels than all other metros, including Grand Junction. We see here also that the Ft. Collins-Loveland area has one of the strongest markets, with Greeley also moving toward peak levels.Northern Colorado continues to show signs of significant job growth. 

(Note: If we include the Boulder-Longmont MSA, we find that the Boulder area has consistently been among the areas with the lowest unemployment rate. In September 2012, the rate in the Boulder-Longmont area was 5.7%.)

New home sales at 5-year high, inventory flatlines

New single-family home sales in the U.S. West rose 80 percent from September 2011 to September 2012, and new home sales have increased in the region, year over year, for eight months in a row. With seven months of sustained year over year growth, new home sales are experiencing some of the most sustained growth seen since 2004, with growth rates reaching a ten-year high.   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 September 2012. That's the same total as reported in both July and August 2012, and slightly down from April, May and june, all of which reported 10,000 new home sales in the region. 

The report, which monitors sales activity for newly constructed houses, reported that in the West, new home sales were up from September 2011's 5,000 new homes sold.  Nationwide, sales rose 29 percent, rising from 24,000 to 31,000 during the same period. 

The first graph shows monthly new home sales totals for each month since 2003. New home sales in the West were tied with 2008 at 9,000 for a five-year high during September. New home sales for September have not been higher since 2007. 

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 75 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 78 percent since the total peaked during June 2007, and the same total has fallen 75 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, and is now at the lowest point recorded since the 1990s. This has led to continued declines in inventory. For a longer historical perspective, see here

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 20,000 homes, the lowest point reached since the early 1990s.  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. 

This report is just the latest report showing ongoing increases in home sales, while at the same time showing declines in inventory. In the short term, with continued monetary easing, demand for homes looks to continue as inventory will only slowly grow, contributing to ongoing price increases.

Philly Fed: Colorado coincident index slightly below national index for 8th month

The Coincident Index for Colorado rose 0.7 percent over three months from June to September this year, which was above the national index's increase of 0.6. September'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 larger in Colorado (0.7%) than in most states. 

According to the September 2012 report:

The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for September 2012.  In the past month, the indexes increased in 39 states, decreased in five states, and remained stable in six states, for a one-month diffusion index of 68. Over the past three months, the indexes increased in 37 states, decreased in 11 states, and remained stable in two states,

The graph below compares the 3-month change in both the Colorado Index and the US index. After five months of lagging the nation in the 3-month change, Colorado moved above the national growth rate in September 2012. 

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. The Colorado index has been slightly below the national index for the past eight months. 

Overall, this report suggests some slowing in Colorado economic activity in relation to the nation as a whole, but by a small amount. 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.

Tuesday, October 23, 2012

Housing News Digest, October 23

State supreme court ruling rejected ‘buyer beware’ mindset in 1964 Q: What are my rights as a homeowner? A: According to the American Bar Association, generally what you do with the home you own is up to you. “You have a right to maintain or neglect, preserve or remodel, keep, sell, or give away, and enjoy your home as you see fit.” Like many other of our rights, however, there can be limitations placed on what a homeowner can do with a property by federal, state or local laws. Cities place limits on homeowners through zoning and building codes which may limit your ability to build a fence, move the driveway or add a garage on the property.

  Broomfield's Arista development a comeback story after downturn BROOMFIELD — Arista, a master-plan development that came to a standstill during the economic downturn, is back on its feet, a comeback story with multiple plotlines. The latest addition to the 200-acre Arista development is KB Homes, which is building a new community of energy-efficient paired homes on the site.

  Stoneleigh JV Closes On $31M Multifamily Loan Stoneleigh Cos. LLC is partnering with Arris Investment LLC to acquire 13.8 acres of vacant land, and the joint venture has closed on the construction loan for the 298-unit apartment project known as M2 Apartments here. The property is the ninth multifamily project acquired and developed by Stoneleigh in the past three years and adds a new major market to its investment portfolio. According to Rick Cavenaugh, president of Stoneleigh, in a prepared statement, “M2 Apartments is our second new construction project started in the past year and will be a unique new product in the Southwest region of Denver. We were fortunate to acquire this in-fill location with tremendous retail and

  Chris Achenbach, David Zucker team up for sustainable projects Chris Achenbach and David Zucker proved that having the right idea at the right time can pay big dividends while also benefiting the community. Their idea seems simple enough: Sustainable building not only is good for the environment and the community, it’s also good for the bottom line. But it took delivering a downtown Denver apartment complex that sold in the last year for a record price to prove it to the market.

  Colorado divvies up $51.2 million in mortgage settlement funds Seven months after Colorado learned it was to get nearly $51.2 million from the multistate mortgage settlement deal with the country's five largest banks, officials announced Thursday it has been divvied up.

New York Fed: Colorado 23rd in nation for REO inventory

Colorado is in the middle of the pack when compared to other states' REO inventory. According to a recent report released by the New York Fed, the total REO inventory in Colorado, as of June 2012, was 8,596 properties. That makes Colorado 23rd in the nation.

The breakdown:


Properties owned by lenders
(Real estate owned)8,596
Share of all United States REO1.9%
State rank15
REO loans share of all loans in state0.78%
State rank23
Change in REO inventory
from June '12 to December '13
in three scenarios:

Mass layoffs in Colorado hit 4-year low

Mass layoff events fell 5.3 percent to 71 events during the first nine months of 2012 in Colorado. There were 75 mass layoff events during the same period last year. According to a new report released today by the U.S. Bureau of Labor Statistics, there were 4 mass layoff events during September 2012 alone, which was down 42 percent from the 7 events reported during September of last year. Comparing the first nine months of each year, both total mass layoffs and first time unemployment have decreased each year since 2009.

Monthly mass layoff events grew rapidly after October 2008 in Colorado, and have gradually declined since. They have fallen off considerably since August 2012.

Nationally, mass layoff events decreased 31.7 percent from 1,189 during September 2011 to 811 during September of this year.

In the year-to-date total for September, mass layoffs have now fallen three years in a row after peaking at 131 mass layoffs during the first nine months of 2009. The second graph shows year-to-date totals for September since 2002:

Mass layoffs were rare from 2004 through most of 2008.

Overall, the most recent mass layoffs data suggests that the employment situation continues to stabilize. New layoffs continue to lessen, but as we've seen in the most recent employment data for Colorado, job growth continues to disappoint and total employment totals remain well below 2008's peak totals.

New jobless claims

New claims for unemployment insurance fell year over year in September by 54 percent to 307 in September 2012. There were 680 new claims during September of last year. New claims for unemployment insurance have also gradually fallen since early 2010. Nationally, new claimants fell 39 percent during the same period.

As can be seen in the third graph, during September new unemployment claims fell year over year in Colorado and nationally. Claims have fallen by more than 50 percent for both August and September 2012, and are some of the largest declines reported since March 2010.

In year-to-date totals for new unemployment claims through September, totals are down 9 percent year over year in Colorado. There were 6936 new claims during the first nine months of 2012, compared to 7626 new claims during the same period last year. In the year-to-date total for September, new claims for unemployment insurance have now fallen three years in a row after peaking at 11,865 claims during the first nine months of 2009. The last graph shows year-to-date totals for September since 2002:

Initial claimant. A person who files any notice of unemployment to initiate a request either for a determination of entitlement to and eligibility for compensation, or for a  subsequent period of unemployment within a benefit year or  period of eligibility. 

Mass layoff event. Fifty or more initial claims for unemployment insurance benefits filed against an employer during a 5-week period, regardless of duration.

Regional Snapshot: Pueblo home sales, home prices, and foreclosures

Foreclosure activity has been flat in the Pueblo area, and home sales have slowly begun to move upward in the region. Meanwhile, median home prices in Pueblo are lagging behind the metro Denver area. A theme we find in the graphs below is that home prices dropped off  significantly during the first half of 2012, and that foreclosures are not improving at the same rate as the metro areas overall. This may be due to a dropoff in employment that has occurred during the first half of 2012 as the unemployment rate headed back up to 11 percent. See here for Pueblo employment data.

The first graph shows single-family home sales transactions. Clearly, home sales activity in 2012 is up from 2011. 2011 was a very bad year for home sales, and was the most inactive year for sales in at least a decade. In Pueblo, 2012 is shaping up to be the most active year since 2009, although that means home sales are at level experienced during the 2009 recession. There is clearly growth, but numbers are low. Low numbers are a result of not just diminished demand, but possibly of lack of inventory as well. I don't have inventory data specific to Pueblo, but we do know that compared to to years leading up to 2008, it remains more difficult  now to obtain a home loan. Over the past four years, home sales have ranged between 100 and 150 each month in the Pueblo area. 

The second graph also shows home sales activity, but in this case, I've used a 12-month moving average to remove seasonal variations. The graph shows that home sales bottomed out at the end of 2011, and have been slowly moving up since. The blue bars show the year-over-year change in sales, and the current trend is clearly upward. Home sales have increased year over year for four months in a row between May and August 2012.   

The third graph shows the median home prices in the Pueblo area and the metro Denver area. Not surprisingly, the median home price in the metro Denver area is well above the median home price in the Pueblo area. During August 2012, the median home price in the metro Denver area was 264,000 and it was 115,000 in the Pueblo area. During August 2011, the metro Denver median home price was 109,000 and it was 223,000 in metro Denver. Year over year, the price was up 6 percent in the Pueblo area and 10 percent in the metro Denver area. 

The fourth graph shows the median home prices in both area after being indexed for comparison purposes. Since 2006, the median home price index was more resilient in the Pueblo area than the metro Denver are up until 2010. Since 2010, the index in the Pueblo area has generally fallen below the metro Denver. There was a significant decline during the first part of 2012 when the median home price fell to 90,000 in both January and February of 2012. The limited size of the data pool here probably overstates the decline in the median price during the period, but we can guess that declining employment in Pueblo during the early months of 2012 contributed to the decline. 

To provide an additional check on the Realtor data I use above, we can consult the Federal Housing and Finance Agency data. The fifth graph shows the indices for both the Denver-Aurora area and the Pueblo area. Again, we see that the prices in Pueblo were a bit more resilient in the Pueblo area during 2006 and 2007, and that they have weakened compared to the Denver area during 2012. 

Finally, looking at the foreclosure data, we see that foreclosures are slowly declining in the Pueblo area, but not as much as among all metro areas combined. The foreclosure filings index, which tracks changes in the number of foreclosure filings (the first event of the foreclosure process), dropped off significantly in the combined metro-area total during 2011, and has remained significantly lower than filings totals from 2007 to 2010. While Pueblo saw a small decline also, the drop-off was not nearly as large. As with all metros combined, Pueblo's totals are below 2007-2010 totals, but have not fallen off as much since 2011. 

Foreclosure auction sales activity has been generally flat since 2011 in the Pueblo area, while sales totals have been falling in the combined metro total since 2011. The last graph shows that foreclosure auction sales (completed foreclosures) have dropped off significantly since fall of 2010, but they've been more flat in Pueblo county. In fact, foreclosure auction sales have been flat, with the exception of some spikes, since mid 2010. 

Taken together all of these indicators suggest the following:
1. Demand for single-family purchase housing is increasing, but declining employment during the first half of 2012 complicated the situation. Demand has been growing more solidly since mid 2012. The growth in demand we are seeing is lagging the growth in demand for homes in metro Denver. This is not surprising given that the employment situation in metro Denver is better. 
2. Foreclosures in Pueblo county, while slowly declining, are not declining as quickly as they are among metro counties in general. If we dug deeper into the data, we would see that foreclosures are declining quite a bit in metro Denver and northern Colorado. Pueblo, however, appears to be declining at a slower rate. 

Overall, the higher unemployment rate in Pueblo is contributing to slowing demand for housing and the slower decline in foreclosure activity. 

Monday, October 22, 2012

Employment in Colorado near 4-year high, but state could need 5 years to bring unemployment rate down

Total employment in Colorado rose to the highest level reported since December 2008, rising to 2.54 million employed persons. Total employment remains approximately 89,000 below peak levels, however, and remains well below levels necessary to accommodate new people entering the work force.

Colorado gained more than 14,000 jobs in September 2012 compared to September of 2011, and the non-seasonally-adjusted unemployment rate fell year-over-year from 7.9 percent to 7.4 percent. According to the most recent employment data, collected through the Household Survey and released Friday by the Colorado Department of Labor and Employment and the BLS, the labor force grew only slightly over the year, rising by 1,110 workers from September 2011 to September 2012. This very small increase in the labor force has helped to bring down the unemployment rate. during September 2012, the labor force consisted of 2.74 million workers, which means unemployment for the month totaled approximately 200,000 persons.

The first graph shows the unemployment rate (not seasonally adjusted):

The second graph shows total employment is up from levels seen during 2009 and 2010, and is at the highest level reported since 2008. Total labor force is now back up near peak levels.

The jobs deficit has been cut by more than 50 percent since late 2010, although the current deficit of 89,000 below the peak does not include the jobs needed for all the new entrants into the workforce since 2008. A stagnant labor force, due at least partially to discouraged workers, early retirees and students returning to school or staying in school longer, has helped keep the labor force from expanding, and has in turn helped bring down the unemployment rate. The Colorado economy has yet to replace all the jobs lost during 2009 and 2010.

In the third graph is shown the year-over-year change in payroll employment in Colorado. Year-over-year growth has usually been under 2 percent since the last recession, and this is generally a smaller growth rate than what was common during the last expansion from 2003-2008. The very large losses that occurred during 2009 and 2010 were the largest losses, by percentage, in at least 30 years.

This report shows that job growth continues to be positive in Colorado, but that growth is not sufficient to really overcome deficits in total employment that have formed since 2008. Labor force activity is moving in the right direction, but continues to be rather tepid.

How many jobs do we need to get back to "normal?"

If we speculate a little, we can theorize that under conditions in which jobs are plentiful, the labor force would grow by a net amount of 25,000 per year. Under the current "abnormal" circumstances, there is no significant net labor force growth as older workers retire early, young people go back to school, and discouraged workers give up looking for work.

The estimate of 25,000 per year is a conservative estimate, but is likely warranted given the aging and retirement of baby boomers. It's difficult to guess how much the labor force would grow under more "normal" circumstances, but the annual average over the past decade is 36,000 new workers per year.  (Since 2008, the average annual workers added has been close to zero) So, using 25,000 in the four years since mid-2008, the labor force could arguably have grown by an additional 100,000 under normal circumstances.  This means that to bring the unemployment rate down to 4%, the state needs to add 189,000 new jobs immediately. Or, to bring the unemployment rate down to 6 percent, the state would need to add 130,000 new jobs. Obviously, that's unlikely to happen overnight.

However, if the state were to consistently add 30,000 jobs per year over the next several years, the unemployment rate would be brought down to 6 percent in 2018. That assumes that as jobs are added, more people begin to re-join the labor force to the tune of 25,000 people per year. It also assumes there's no recession with job losses in the interim. The state is presently on track to add a little under 30,000 this year, and it added 90,000 last year. Of course, that big gain came after 3 years of big losses.

This is just one possible scenario.

I'm relying totally on the Household employment survey for these guesses.