Thursday, March 21, 2013

2012 building permits up for third year in a row in Colorado

At year-end 2012, there were 13,110 single-family permits issued for the year in Colorado, and 9,880 multifamily permits (5 units or more). Year over year, single-family units grew 50 percent, and multifamily permits grew 125 percent. Taken together, building permits were up 75 percent from 2011 to 2012. Combined, there were 22,990 units issued in Colorado during 2012.

The first graph shows total permits broken out into single-family and multifamily permits. From 2009 through 2011, permits were at some of the lowest levels experience since the early 1990s. The large amount of growth since  move permit activity closer toward the average number of annual permits issued since 1990, which is 30,700 units. 2012's total remained well below the average.

The second graph shows total permits in each year compared to the number of new households formed. When the blue line is above the brown bars, then there are more households being formed than there are new units permitted. 

Not surprisingly, during the peak housing bubble years from 2002-2006, there were more units permitted than there were households formed. Since 2007, however, the situation has reversed. Indeed, the excess in units from 2002-2006 (83,200 permitted units) are similar to the number of the shortfall in units since 2007 (83,500 permitted units).  The third graph shows the excess or shortfall for each year: 

In the final two graphs, I've calculated the number of units permitted each year as a proportion of the total number of households in Colorado at that time. Going back to 1985, I've looked at total permits for each year. The fourth graph shows multifamily permits for each year as a percentage of the total number of households in that year. (2012 household data is not yet available, so I've estimated the number for 2012 at 30,000 more households than was the case in 2012. This is a high number and designed to avoid over estimating the impact of new multifamily units.) The red line shows the average since 1985. 

The fourth graph shows that multifamily activity was slightly above average during 2012 following three years of activity that was well below average.  2012 levels were above what was common during the late 80-s and early 90s when the economy was very weak in Colorado.  We also see that 2012 may have been the most active year, by this measure, in a decade. 

The final graph shows single-family permits activity a s a proportion of existing households. The red line shows the average since 1985. In this case, we see that single-family permit activity remains well below the average during 2012. 

At year-end 2012, the state is looking at, more or less, three years of growth in permits, and this is especially being driven by growth in multifamily permits right now. Single-family permits activity was restrained during 2012, although the industry has indicated it plant to increase production significantly in 2013. Multifamily permit activity is likely to grow again in 2013, although not at the same pace as was seen form 2011 to 2012.