Housing downturn persists in September

The local housing market remained mired in one of its worst slumps in years during September, as home construction plunged, prices sagged and foreclosures continued at a record clip.

The number of single-family homebuilding permits issued last month in El Paso County fell to its lowest level in nearly 16 years, according to a report released Monday by the Pikes Peak Regional Building Department.

Also, the median price of homes — mostly resales — that sold in September fell when compared with the same month a year ago, the Pikes Peak Association of Realtors said. It was the second straight month prices have fallen.

And with another batch of foreclosures in September, the number of loans in default for the first nine months of 2007 has surpassed the total for 2006, according to the El Paso County Public Trustee’s Office.

Together, those statistics translate to a housing market in which too many homes — new houses, resales and foreclosures coming back on the market — are for sale. That’s triggered intense competition, price reductions and long waits for sellers.

“Clearly, it’s a buyers’ market,” said Kevin Patterson, a veteran real estate agent and head of The Patterson Group in Colorado Springs. “The challenge I have with the doom-and-gloom is that it not become self-fulfilling. But the numbers don’t lie. It’s not a pleasant time to be selling a home.”

In large part, Patterson and others blame fallout from a nationwide mortgage industry crisis: too many socalled subprime loans made to buyers with risky credit and too many nontraditional loans, such as interest-only loans.

When house payments for those homeowners increased, coupled with rising gas prices, credit card payments and other higher consumer costs, many buyers who probably should never have qualified for a home loan started missing payments and losing their homes to foreclosure.

Those foreclosed homes are adding to a swollen supply of homes and creating more competition for the resale market and for home builders.

Conditions are bad enough that the homebuilding industry probably already is in a recession, using the textbook definition that a recession reflects two straight quarters of declining economic activity, said Fred Crowley, an economist with the University of Colorado at Colorado Springs.

“The (new) residential housing market has been in a decline in the community for something like 15 or 17 months,” Crowley said. “So you’d have to say new residential construction is in a recession right now.”

The building slump has a ripple effect throughout the economy. For every construction worker laid off, Crowley estimated, another four jobs are lost at building suppliers, delivery companies and the like.

Also, Colorado Springs and other governments rely on sales tax revenue from the purchase of lumber, drywall and other building materials, and a construction slowdown could hurt tax collections. That means governments have less money to spend on public safety, roads, parks and other services.

Colorado Springs’ budget for 2008 would be cut by $6.5 million in part because the new-home slowdown has led to lackluster sales tax collections, according to a spending plan city officials proposed Monday.

George Hess, head of Vantage Homes and board president of the Housing and Building Association of Colorado Springs, said there are plenty of homebuyers. But many want to negotiate prices because they know it’s a buyers’ market.

For builders like Hess, some of his competition includes the homes he built five and six years ago that are now for sale. There’s nothing wrong with them, he said, but some buyers don’t want to pay more for a new home when they can get a better price on a Vantage Home that’s still like new.

Hess said his challenge is to give buyers something different. So he’s reworking home designs and floor plans to come up with new styles and features and offering buyers something they can’t find in the resale market.

“You have too much supply and not enough demand,” Hess said. “The impacts are obvious. It’s going to take a while for this credit crisis to be fixed.”

CONTACT THE WRITER: 636-0228 or rich.laden@gazette.com