DENVER HOUSING 1Q18: As Prices and Starts Continue to Surge, Proposals to Limit Housing Growth Begin to Surface
- Quarterly new home starts were up 14% over 1Q17 levels, the second consecutive quarter of double-digit increases.
- Annual starts continue to grow, up 8% over 1Q17 levels and the first time builders have eclipsed the 12,000 mark since 2007.
- At no time in Denver’s history has housing been as expensive as it is now with only 22% of new home starts priced below $400,000. Starts below $299,999 are down 66% and are now virtually non-existent.
- Consequences of Denver’s rapid growth have manifested in proposals to limit housing growth, which could have serious long-term impacts on the economy and homebuilding industry.
Metrostudy’s 1Q18 survey of the Denver housing market shows that builders are moving as quickly as possible to meet the swelling demand for homes, having started 3,222 homes in the first quarter, an increase of 14% over 1Q17. This is the second consecutive quarter with double-digit increases, as builders have been able to leverage the relatively mild weather this past winter and early spring coupled with the resolution of the Weyerhaeuser floor joist ‘flak-jacket’ issue that impacted a large number of builders late last year and pushed home starts into 2018. Annual starts continue to grow, now at 12,396 units, which is a 8% increase over 1Q17 annual starts and the first time builders have eclipsed the 12k mark since 1Q07. Builders also closed 2,733 homes in the first quarter, up 14% compared to 1Q17. Completions and move-ins were expected to increase this quarter after two consecutive quarters of declines, while impacted builders had to grapple with the Weyerhaeuser issue, which is largely in the rearview mirror. Despite that challenge, annual closings in 1Q18 were still up 6% to 10,462 units.
Housing affordability continues to be a major concern for the industry, prospective buyers, and government and economic development officials. At no time in Denver’s history has housing been as expensive as it is now with only 22% of new home starts priced below $400,000. Starts below $299,999 are down 66% and are now virtually non-existent. The price bands with the largest year-over-year gains are the $500,000- $599,999 segment with a 28% increase, and the $600,000-$699,999 segment with an 83% increase. These two segments combined account for 31% of all homes built in the metro area and demonstrate the continued strength of the market in general.
“Many of the firms relocating to Denver are making the move from higher-priced markets, such as Northern California and the Northeast, as Denver continues to build on its reputation as a dynamic economy with a high quality of life that attracts a well educated and hard-charging workforce,” said John Covert, Regional Director of Metrostudy’s Denver market. “However, consequences of Denver’s rapid growth have manifested in several local and regional proposals to limit housing growth, including Ballot Initiative #66. This proposal, which has yet to begin acquiring the required 98,000 signatures to be placed on this November’s ballot, would limit residential building permits to 1 percent of current housing stock in 2019 and 2020 for 10 Front Range counties, including those that make up the Denver Metro Area. Metrostudy has analyzed the potential impact of this restriction in these areas and our initial estimates are for over a 50% drop in permits based on 2017 household estimates and permits pulled.”
The housing market is estimated to remain underbuilt, relative to demand, for several more years given the severity of persistent constraints facing the industry, which should provide builders the opportunity to grow at a measured pace. Unless of course, the proposed Ballot Initiative #66 gets the required signatures, is presented before the voters in November, and passes. In which case, all bets are off as to the long-term impact to the economy and homebuilding industry.
For information contact:
John Covert – 720.493.2020 x 201
About Metrostudy: Metrostudy, a Hanley Wood company, is the leading provider of primary and secondary market information to the housing and related industries nationwide. Established in 1975 in Houston, Metrostudy provides research, data, analytics and consulting services that help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day. www.metrostudy.com
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