At the peak of the home construction boom in 2005, many of the new subdivisions in Mesa County were crowded with the contractor pickup trucks coming and going from job site to job site. It was amazing to see the countless cement trucks backed up to all the freshly scraped lots ready to pour new foundations.
On a recent drive through a subdivision at the northeastern end of the Grand Valley, I was reminded of those days. Even though new home building is somewhat isolated in our community at present, the fact is there are more new homes coming out of the ground.
The peak of activity was in 2005 with 1,525 new housing starts. It appears the tide has turned from the radical decreases of recent years to a noticeable uptick this year.
New housing starts through June of this year (207) are up over the same period last year (137) by 51 percent. All indications are we’ll see that trend continue through the remainder of the year. While that number is still just a third of the activity in the peak year of 2005, it’s clear new home construction has returned to the Grand Valley.
Similarly on a national basis, there’s a significant increase in new housing from the peak years of 2007. Compare this year’s seasonally adjusted annual rate of 760,000 new starts to the depth of the housing bust in 2009 with a seasonally adjusted annual rate of 478,000 starts. That’s a 59 percent increase. While that number sounds good, we’re still at about only half of the 1.5 million annual housing starts economists consider normal nationally.
Both local and national data reflect a rebound in new home construction. The significance of this trend to every resident of our community is that while new homes offer choices to those in the market to buy, it also means jobs are being created.
According to Traci Weinbrecht, executive officer of the Home Builders Association of Northwestern Colorado, every new home built creates an average of three additional jobs for a year. If a projected 429 homes are built, that means we can add an additional 1,287 jobs this year.
New home construction has always played a significant role in employment in the Grand Valley, and I believe that’s a positive element to consider in the overall economic health of the community.
So, what’s driving the activity? As is often the case, there are many contributing factors. Record-low mortgage rates, pent-up demand for new construction, reduced labor costs and attractive lot prices fuel the upward trend in new home construction. In many cases, finished lots have been purchased for a half or a third of what they were selling for five years ago.
These factors combined make it possible for new homes to compete in a marketplace still heavily influenced by foreclosures and other distressed property sales. Although there’s no clear indicator for how quickly labor and lot costs will rise, the expectation is that these will also increase as the economic recovery continues. I believe in years to come we’ll look back at 2012 as one of the best opportunities to purchase a new home.