Ted Leighty, Executive Officer of Colorado Association of Homebuilders summarized the efforts of the organization to advocate for safe, obtainable and quality housing for all Coloradoans at the State level. Updates were provided on the most recent Legislative Session, primarily focusing on bills affecting attainable and affordable housing, such as House Bill 19-1319. This bill was approved and allows for more accessible financing to private and nonprofit developers building affordable housing projects.
U.S. Senator, Cory Gardner, also addressed the need for affordable housing policy by reexamining opportunity zones and addressing limited water resources in Northern Colorado.
Dr. Robert Dietz, chief economist for National Association of Home Builders, gave the keynote presentation addressing local population and economic growth, affordability, construction outlooks as well as a brief commentary on a national recession concerns.
Local population and economic growth. The data supports Fort Collins is a desirable place to live. In 2018, the Nation’s population grew 0.6%, where Colorado experienced a 1.4% growth. Outpacing both National and State rates, the Fort Collins metropolitan statistical area (MSA) grew 1.9%, triple the rate of national growth. Dietz states, "The Northern Colorado market has the strongest growth I have seen in at least two years." Additionally, the GDP of the Fort Collins MSA grew 6% in 2017 when compared to 2016 and job growth is approximately 25% above the Nation in average.
Housing Demand and Affordability. The increased demand of population growth stresses housing availability, increasing prices. The Existing House Price index for the Fort Collins MSA (172%) is well above the National number (117%) and also above the pre-recession peak. The high index is also out pacing income growth which strongly signals a lack of available housing and demand for more units. Nationally, approximately 850,000 new home starts will occur; however, to meet the demand, approximately 1,000,000-1,100,000 starts would be required. Locally, single family building permits are down 4.2% in 2019 when compared with 1,679 units started in 2018.
Construction outlook. Nationwide, builder confidence is trending higher as interest rates move lower, however, there are supply-side constraints to overcome. Lumber prices continue to fluctuate with Canadian tariffs alongside supply and demand. Lumber prices rose 63% to $582 per thousand board feet in 2017, but have since declined to $367 per thousand board feet as of September this year. The shortage of skilled labor continues to put pressure on productivity and capacity in the home building industry. One contributing factor is the lack of younger, skilled workers replacing the aging, experienced workforce of yesteryear. Lastly, regulatory costs are continually increasing and are up 29% over 2011-2016. On average, regulatory costs account for 24.3% of a new home price; 14.6 during development and 9.7% during construction.
National recession concerns. Overall, the national economy remains strong, but is slowing after Q1 2019. The county is currently experiencing the longest growth cycle at 125 months long. The model, according to The National Bureau of Economic Research (NBER), shows a few more years of expansion. Dietz shared a quote by the former Chair of the Federal Reserve, Ben Bernanke, “Expansions don’t die of old age. They are murdered”. When comparing the historic data during the past recessions to the current the economic trends, the Federal Reserve needed to lower the interest rate, but whether or not it was done soon enough will be answered in the upcoming years if the next economic slowdown is realized or avoided. (October 30th, 2019 Fed Rate Update)
Interestingly enough, households are not over borrowing on their homes. Mortgage debt has significantly declined since the last major recession. In 2008, mortgages accounted for 7.2% of disposable income for US households, today, mortgages only account for 4.3%. Homeownership has also declined since the recession, but has been slowly increasing since 2016. The current National Rate of homeownership is 64.6%. Conversely, student loan and auto loans have significantly increased. On average there are 43 million student loan borrowers paying an average of $390 per month. Increased consumer debt is a major contributing factor in delayed or declined homeownership.
2019 Housing Summit Presentation Slides: https://www.nocohba.com/housing-summit
NAHB Analysis on economics and Housing Policy: http://eyeonhousing.org/