Colorado Springs-area home builders enjoyed their best year in more than a decade during 2018, a pace that should continue in 2019, industry officials say.
Last year, building permits issued for the construction of single-family homes in El Paso County totaled 3,856, a 10 percent increase over 2017 and the most since a record 5,314 permits in 2005, according to figures compiled by by Pikes Peak Regional Building Department.
A much-improved Colorado Springs economy, more jobs and long-term mortgage rates that remained relatively affordable — even as they ticked up during the year — have been credited by builders as driving the demand for homes in 2018.
“To me, that speaks of consumer confidence, that the buyers are out there buying,” said Todd Anderson, board president of the Housing & Building Association of Colorado Springs and owner of a building industry and leadership development consulting firm. “And just looking at inventory that’s out there, both new and used, nobody’s got that much to sell right now.”
An influx of buyers who’ve moved to the Springs from Denver also helped boost the demand for new homes, Anderson said. Housing costs are roughly $100,000 cheaper in the Springs and El Paso County and Denver-area buyers are willing to commute to their jobs up north to save money, he said.
“Bigger house, better lot. And $100,000 to $150,000. It’s a huge deal.”
Last year’s building permit total climbed despite a final-month tumble; just 92 permits were issued in December, the fewest for any month since 85 were issued in January 2011.
December’s drop in permits, however, wasn’t a sign of a slowdown, experts say. Instead, the decline likely resulted from builders taking out extra numbers of permits in October and November to avoid paperwork requirements and higher costs related to new energy efficiency building codes that took effect Dec. 1, said Anderson and Greg Dingrando, a Regional Building Department spokesman.
In 2019, HBA and Regional Building officials expect single-family permits to total about 3,600, Anderson said.
“(That’s) better than good,” he said. “Anything above 3,000 is good. When you start getting closer to 4,000, I think that should categorically be great.”
Getting close to 5,000 to 6,000 permits a year, however, would signal the market is overbuilding, which would create excess inventory, Anderson said.
“I think that 3,000 to 4,000 is the sweet spot of a sustainable number,” he said. “With our population and our job growth and in-migration, we should be able to do 3,000 to 4,000 every year.”
Rising interest rates and higher construction costs, however, could dampen the pace of homebuilding somewhat in 2019, Anderson added. As borrowing and building costs rise, first-time buyers especially might have a tougher time making a purchase, he said.
Thirty-year, fixed-rate mortgages began 2018 just under 4 percent, but then increased throughout much of the year and hit a high of 4.94 percent during the second week of November, according to mortgage buyer Freddie Mac. Rates, however, have since fallen and averaged 4.55 percent nationally during the final week of 2018.
The homebuilding industry is a major part of the Colorado Springs-area economy. Builders and their subcontractors employs thousands of drywallers, framers, plumbers, electricians and the like, while the purchase of building materials pumps millions into the coffers of Colorado Springs and other local governments, who use that money to help basic services.