September 4, 2013
The pace of local homebuilding slowed last month for the first time since late 2011, a decline that could signal that homebuyer interest has cooled because of rising mortgage rates.
Single-family home building permits totaled 237 in August, a 6 percent drop from the same month last year, according to a report Tuesday by the Pikes Peak Regional Building Department. The permits were issued for homes to be constructed in Colorado Springs and surrounding El Paso County.
The decline was the first year-over-year reduction in single-family building permits since December 2011.
Even as monthly permits fell, totals for the first eight months of this year remained ahead of last year's pace. Permits totaled 1,995 through August, a nearly 36 percent increase over the same period in 2012, according to Regional Building figures.
The local housing market has rebounded over the last 12 to 18 months following the national recession; home construction, sales and prices all have risen.
Economists and housing industry experts have credited historically low mortgage rates, in large part, for propelling the recovery. Other factors included an improving economy and a pent-up demand on the part of buyers.
For much of 2012 and through the first half of 2013, mortgage rates nationally for 30-year, fixed-rate loans averaged below 4 percent and had fallen as low as 3.31 percent, according to mortgage buyer Freddie Mac.
However, since late June, mortgage rates have been climbing; last week, rates for 30-year, fixed-rate mortgages averaged 4.51 percent nationally after having been as high as 4.58 percent the week before.
Last month's decline in building permit activity probably "has a fair amount to do with interest rates and home values (prices) going up," said John Bissett of JM Weston Homes and board president of the Housing and Building Association of Colorado Springs.
Still, Bissett said he doesn't expect the one-month decline to become a downward trend. Mortgage rates remain affordable, homebuyers will adjust and the market's forward momentum will slow - but to a more sustainable level, he said.
"At this point, there's no cause for alarm and the market is just balancing out to a more realistic pace," Bissett said. "This is really more of a normalization of the market."
Meanwhile, the local foreclosure picture continued to improve last month in the Pikes Peak region.
Local foreclosure filings totaled 154 in August, down by more than half from the same month last year, a report from the El Paso County Public Trustee's Office shows. The August total was the lowest for any single month since a similar number of filings in July 2005.
Through the first eight months of the year, foreclosure filings totaled 1,369, down 42.5 percent from the same period in 2012.
In Colorado, foreclosure filings are the start of the legal process that can lead to the loss of a residential or commercial property at a Public Trustee's auction.
While foreclosure activity has slowed locally, El Paso County nevertheless had the highest number of filings in the state on a year-to-date basis, Public Trustee Tom Mowle said in his report. Since El Paso County has the state's largest population, it's "neither surprising nor completely alarming" that foreclosure filings are highest here, he said.
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