The pace of Colorado Springs-area homebuilding will remain sluggish the rest of this year and into early 2009, turning around only after job growth picks up and housing inventories shrink, according to a report by Metrostudy, a Houstonbased research firm.

"We're going to be bumping along, with this sort of absorption, this sort of (construction) activity, for the next couple of quarters," said John Covert, who oversees the Springs market for Metrostudy. "Essentially, what builders are doing right now is building to meet the current demand. And current demand right now is pretty slow."

Covert made his comments after speaking to about 100 members of the Housing and Building Association of Colorado Springs during a morning meeting at the Doubletree World Arena Hotel. Metrostudy tracks several cities around the nation, assembling housing data, analyzing market conditions and identifying trends.

The homebuilding industry is a closely watched staple of the Springs' economy, employing thousands and pumping millions into local government coffers.

When homebuilding slows, as it has over the past year in conjunction with a national housing slump, the effects ripple across the local economy. Homebuilding in the Springs and surrounding El Paso County, as measured by the issuance of building permits, fell 38 percent in 2007 over the previous year and is down 43 percent in the first half of 2008. Several builders have laid off workers and both Colorado Springs and El Paso County have seen reductions in sales tax receipts because builders have scaled back purchases of construction materials.

Covert's look at the Springs market was by no means doom and gloom.

Colorado Springs didn't have unsustainable, double-digit increases in housing prices over the past few years, and so values haven't fallen as far as they have in other cities around the country, he said. Also, housing remains relatively affordable here, jobs are being added and the Springs and El Paso County continue to see gains in population.

"There's still people buying houses in this market," he said.

Still, Covert said, the Springs' new home market has several obstacles to overcome before construction rebounds.

Increasing numbers of foreclosures and a swollen supply of resales on the market - nearly 6,600 in June, according to the Pikes Peak Association of Realtors - provide stiff competition for new homes, Covert said. Even as jobs have been added, job growth is at a slower pace than past years and the local unemployment rate of 5.4 percent was at a three-year high in May.

Too many vacant apartments also provide homebuyers with an option to rent instead of buy, Covert said. And even as other cities are worse off, transplants to Colorado Springs from, say, California or Florida, are losing money when they sell their homes in those states and have less to spend on a new house when they move here, he said.

Consumer confidence - battered by rising gas prices and other higher costs - also is driving buyer decisions, he said. For many people, Covert said, "there's no compelling reason" to purchase a house because they fear home values will decline - even though property should be viewed as a long-term asset that ultimately increases in value.

"Colorado Springs is in relatively good shape, from an economic standpoint," Covert said. "But it's the resale inventory right now that is suffocating the market, and the lack of job growth. We have job growth, but not at the pace that's going to pull us out of this fast enough. If we stay at the current pace we're at, it's going to take us all the way to 2009 to start building more homes again. ... Job growth brings in immigration - new residents that need housing."

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

AT A GLANCE

The Colorado Springs area has an estimated 4.2-month supply of finished, but vacant, newly built homes on the market.

Builders must continue to slow their construction and reduce inventories to help speed a recovery in the new home market

More jobs and a reduction in the ranks of existing homes will help spur demand for new homes.

To attract buyers, builders have the unenviable task of reducing selling prices at a time when construction material costs are rising. One way to reduce prices: Build homes on smaller home sites.

Builders must devise creative floor plans to attract buyers, keeping in mind that homes in the $200,000 to $250,000 range are most popular with local buyers because it's what they can afford.

Construction activity will slow in 2009 - maybe 2,500 new homes and town homes, rising to 3,500 in 2010.

METROSTUDY