Building permits issued for the construction of single-family homes fell 20% in September, the second straight monthly drop, according to Pikes Peak Regional Building Department figures. Year to date, however, building permits are running 7.3% ahead of the same period in 2020. THE GAZETTE FILE 

The pace of Colorado Springs-area home construction declined in September for the second straight month, which one builder says signals a market slowdown that's been triggered by higher costs to produce homes.

In September, the Pikes Peak Regional Building Department issued 360 permits for the construction of single-family homes in El Paso County, a 20% drop from the same month last year, according to a report Friday by the agency.

Single-family permits also fell 20.3% in August on a year-over-year basis.

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Those numbers are for single-family, detached homes, but not other types of housing, such as townhomes, condominiums and apartments.

Covington Homes owner Ron Covington blamed higher costs of lumber, steel, copper and other building materials, which builders have passed on to buyers.

Because of those price spikes, some buyers have opted against new home purchases and construction has slowed as a result, he said.

"The affordability index is going down and people are getting priced out of the market because of the (higher) costs," Covington said.

"So, the slowdown is real," he added.

But it might not just be that some buyers have reconsidered their purchases.

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Builders have encountered supply chain issues, which have delayed their ability to obtain materials, appliances, cabinets and other products they need to complete a home, said Marla Novak, government affairs vice president of the Housing & Building Association of Colorado Springs.

Finding and keeping quality labor also has been a problem for builders, she said. 

As a result, some builders have chosen to slow the pace of home construction rather that sign contracts with buyers for homes they can't deliver in a timely fashion, she said.

"Doing houses at that pace they were doing is not sustainable," Novak said.

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Even as building permit activity has slowed the past two months, the Colorado Springs-area homebuilding industry remains on pace for another good year that will be comparable to 2020, Novak said.

Through the first nine months of 2021, single-family permits totaled 3,525, up 7.3% over the same period last year, the Regional Building Department report showed. For all of 2020, single-family permits totaled 4,497, which was a 15-year high.

"It's still a strong year," Novak said. "The builders are just pacing themselves," she said. "They are taking control of their inventory. They're not just signing contracts to sign them." 

Economists and real estate industry members keep a close eye on building permits because they serve as one yardstick by which to measure the health of the Pikes Peak region's economy.

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Thousands of people work in the homebuilding industry, including framers, electricians, plumbers and the like. In turn, they spend their paychecks on cars, TVs, furniture and other items, and those purchases help fuel the local economy.

The city of Colorado Springs, meanwhile, levies a sales tax on the purchase of construction materials, which generates millions of dollars in revenue each year to help fund roads, parks and other basic services.

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