National Builders 2010 Forecast
The National Association of Home Builders (NAHB) gathered this week in Las Vegas for their annual summit of the latest innovations in home building products and market trends discussions, although this year’s event is significantly dominated by economics, political factors, and the recovery outlook for 2010. There was agreement that recovery will be sporadic and regionally specific, most challenging in California, Nevada, Arizona, and Florida where the only silver lining is that declining market values are beginning to flatten instead of free fall.
Denver’s 30 year average is 17,000 new homes building permits, combined for single family, condos, townhomes, and apartments. In 2009, there were less than 3,300 permits issued for the entire seven county Denver Metro area. Forecast for 2010 is only slightly better, estimated at 5,000. Underlying the calculations, both nationally and locally is the job market status where Denver hovers just under 7% unemployment, compared to the nation as a whole above 10%. Not counted in those figures are those who have given up the job search entirely. Statistically, they are officially considered “not in the Job Market”. Essentially then, the long term economic recovery is difficult to forecast. Denver is forecasted for a job growth of 1,500, compared to a job loss total of 100,00 in 2008 and 2009 combined.
“Nationally, mortgage delinquincies haven’t yet peaked, unlikely to do so until several months following the peak of unemployment. The number of homes on which home owners are behind by at least 90 days will continue to grow in 2010. The consensus of economists was that mortgage interest rates were headed higher, but were not expected to be above 6% in the next year or two”, according to the NAHB press release. Colorado is ranked 34th in US foreclosure filings. Sounds like good news compared to our Top 5 most foreclosures rankings in 2007. However, since 2007’s peak at 26,520, and 2008’s 24,821, Denver’s 7 county metro area completed 26,261 foreclosures in 2009. Forecast for 2010 is a consistent 25,735. Therefore, our numbers are not necessarily improving; the national volume is simply greater than Colorado’s. Not out of the woods yet, distressed sale experts, including yours truly expect this market to take another 2-3 years in recovery.
Builder confidence is greater than 12 months ago, although still extremely cautious. Financing is very difficult on development projects, working toward delivery of buildable lots, compounded by the fact that some regions have experienced dramatically declining land valuesl. Denver’s trends parallels the national dynamic, especially in the category of production sites in the sub $300,000 homes price range.
Generally, Denver’s real estate market has a head start toward recovery, compared to national trends, but we expect 2010 to be similar to 2009, hopefully supported by an improving job market.