Construction is underway on a home in the Indigo Ranch development on Colorado SpringsÂ’ northeast side. The pace of homebuilding in February jumped by a little more than one-third from the same time last year, according to a new Pikes Peak Regional Building Department report. RICH LADEN, THE GAZETTE
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FILE - Construction is underway on a home in the Indigo Ranch development on Colorado Springs’ northeast side. RICH LADEN, THE GAZETTE

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Colorado Springs-area homebuilding hit a 12-year high in 2017, and the pace of construction shows no signs of slowing in the new year, some local builders say.

Permits issued for the construction of single-family homes in the Springs and El Paso County totaled 3,504 last year, according to a report this week by the Pikes Peak Regional Building Department. That's 8.2 percent higher than the previous year and the largest annual total since a record 5,314 permits were issued in 2005, Regional Building Department reports show.

A strong December helped boost last year's total; 251 single-family permits were issued last month or 14.1 percent higher on a year-over-year basis.

"That's a phenomenal year," said Mike DeGrant, a real estate developer and 2018 board president of the Housing & Building Association of Colorado Springs.

Brian Bahr, chairman and founder of Springs-based Challenger Homes, said his company had its best year in 2017 - more than 400 completed home sales or about 5 percent higher than in 2016.

"Demand is extremely high," Bahr said.

A surging local economy, strong job growth and affordable, long-term mortgage rates contributed to a banner year for homebuilding in 2017, DeGrant said.

At the same time, a tight supply of homes available for purchase in the resale market helped the homebuilding industry, Bahr said. And many Denver-area residents have moved to Colorado Springs and El Paso County in search of lower home prices while they commute to their jobs.

"We see employment growth and we see a large number of people moving here," Bahr said. "Certainly in the Pikes Peak region, we are getting an overflow of buyers from Denver, which has reached a level of being unaffordable for most households."

A healthy homebuilding market is a big plus for the local economy. The construction industry employs thousands of people, while Colorado Springs and other local governments rely on tax revenue from the purchase of building materials to help fund their budgets.

In 2018, the demand for housing should remain steady and the pace of home construction should mirror that of 2017 or even increase slightly - possibly by a few percentage points, DeGrant said.

But the industry will have its challenges in 2018.

Some builders face a shortage of home sites and might be unable to construct as many houses as they'd like, Bahr said. Builders also will continue to wrestle with a labor shortage, DeGrant said; over the last few years, a lack of construction workers has delayed the completion of homes by some builders.

A substantial increase in mortgage rates also could hurt demand, Bahr said. Long-term rates have been hovering around 4 percent; last week, 30-year, fixed-rate mortgages averaged 3.99 percent nationally, according to mortgage buyer Freddie Mac.

In fact, there's an increasing concern among builders that rising home prices and interest rates could put single-family homes and townhomes out of reach for some buyers, Bahr said.

"We certainly need to, as a community, figure out how to provide homes that are attainable to the families that are working in our community," he said.

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Contact the reporter: 636-0228

Twitter: @richladen

Facebook: Rich Laden

Business writer, Colorado Springs Gazette

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