Lower mortgage rates may boost dismal local market

Housing in the Colorado Springs area suffered through one of its worst downturns in recent memory during 2008, as home building slowed to a pace not seen in nearly two decades and foreclosures climbed to a second straight annual record.

But if there's hope for the home building industry in 2009, it's that mortgage rates have dropped sharply, said Ralph Braden, this year's board president of the Housing and Building Association of Colorado Springs. Nationally, 30-year, fixed-rate loans averaged 5.1 percent this week, according to mortgage giant Freddie Mac.

"When you look at the signals that would help us see an improvement, interest rates are more favorable," said Braden, a vice president with Nor'wood Development Group in Colorado Springs.

At the same time, Braden said, thousands of troops are expected to arrive at Fort Carson later this year, home builders already have scaled back their inventory and the incoming Obama administration will focus on ways to stimulate the economy.

In 2008, the area's home building slump mirrored that of the nation: a recession, job losses and waning consumer confidence kept home buyers on the sidelines.

Single-family building permits in El Paso County totaled just 43 in December, the lowest one-month total since 40 permits were issued in January 1991, according to a report released Friday by the Pikes Peak Regional Building Department.

For all of last year, single-family building permits totaled 1,223, a 42.7 percent drop from 2,135 in 2007. The 2008 total was the lowest since 1,154 permits were issued in 1991.

The dramatic reduction in home building activity can be felt across the local economy.

Home builders have laid off hundreds of employees - not just construction workers, but secretaries, accountants and even executives. With fewer homes to construct, builders are buying fewer home sites from land developers, who then struggle because of large parcels that they've borrowed money on, but which aren't generating revenue.

Local governments also have felt the effects. Because they're constructing fewer homes, builders have reduced their purchases of construction materials, which means lower sales tax collections for local government. And because they're not collecting as much sales tax, both Colorado Springs and El Paso County have slashed their budgets and trimmed payrolls, which means less spending on police protection, roads, parks and other government services.

In a recent report on the area's housing market, Colorado Springs economist David Bamberger laid out two scenarios for the home building industry. If federal stimulus efforts kick in, job growth picks up and consumer confidence improves, single-family building permits might total 1,800 in 2009, Bamberger said in his report. But assuming that a recession deepens, permits could plunge to 900 this year, he said.

Braden doesn't predict a major turnaround this year, and said single-family building permits could match the 2008 total, and even inch upward toward 1,500.

Any home building rebound, however, won't happen until the second half of the year, predicted Fred Crowley, a University of Colorado at Colorado Springs economist. It would take time for a federal stimulus package to be approved and for the nation to feel its effects, he said. Also, additional troops coming to Fort Carson won't all buy homes right away.

"The third quarter or fourth quarter is when you'd start to see visible signs of improvements," Crowley said.

Meanwhile, El Paso County foreclosures totaled 4,602 in 2008, breaking last year's record of 3,556, according to a report issued Friday by the County Public Trustee's Office, which administers foreclosure filings.

In Colorado, a foreclosure filing is the start of a legal process that can result in the loss of a home. Once a foreclosure notice is received, a homeowner has several months to catch up on payments or work out a deal with a lender to stave off the loss of a home.

In 2008, about one-third of El Paso County foreclosure notices were withdrawn by lenders, about the same number as 2007, according to the Public Trustee's Office.

Another 47 percent of last year's foreclosure filings resulted in home sales, most of which were taken back by lenders.

The previous foreclosure record was 3,476 in 1988. Real estate experts have said the foreclosure problem was far worse at that time because the area's population was smaller and foreclosures were spread over fewer homes.

Like other cities, the nation's sub-prime crisis hit home in Colorado Springs last year; too many homeowners with risky credit histories who obtained mortgages couldn't make their payments and wound up in foreclosure.

Foreclosed homes that come back on the market pose competition for builders and homeowners trying to sell their properties because those homes often are marketed at reduced prices. Foreclosed homes also can hurt property values of nearby homes, experts say.

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Contact the writer: 636-0228 or rich.laden@gazette.com  

Second lowest total of permits

43 single-family building permits were issued in El Paso County totaled in December. The lowest one-month total since 40 permits were issued in January 1991