2012 built framework for housing turnaround
A look back at local real estate numbers from last year may provide a tentative answer to the question that buyers and sellers have been asking since the crash a few years ago: Has this miserable market finally hit its bottom?
When it comes to single-family home construction in Mesa County, which saw a 36 percent jump in permits pulled in 2012 compared to 2011, at least one local real estate professional thinks that the corner might have been turned.
“2012 appears to be a turnaround year,” is how Kevin Bray, development coordinator for Bray Real Estate, characterized the numbers in a detailed analysis he recently compiled.
“I think that people might be interested in getting into the market again, if they interpret these numbers the way that I do, that we have hit a bottom,” Bray said.
Bray said many developers who did not build in 2011 seemed to re-enter the local scene in 2012. As an example, he said local builder Blue Star completed 76 homes in 2012, five more than in 2011.
Another builder Bray notes as ramping up last year is On-Track Builders, who went from a “quiet” 2011 to pulling 20 permits in 2012 for the White Willows subdivision off Riverside Parkway.
“Much of the new activity can be attributed to homebuyers taking advantage of low construction costs, low land costs, and record low interest rates,” Bray wrote in his analysis.
As Bray notes, much of the increased activity has been in the $250,000-and-below price range, and it’s a trend he sees continuing into this year.
But as activity heats up in this price range, inventories will shrink for these lower-end lots. That could “slow construction and put upward pressure on new home prices,” Bray surmised.
He further looked at the top four subdivisions, by volume in 2012, in the $250,000-and-below price range: White Willows in Grand Junction, Silver Mountain in the Fruitvale area, Red Rocks Subdivision in Fruita and Wine Valley Estates in Palisade. He concludes that they’ll “run out of inventory in 2013 if they continue to build at the same rate as in 2012.”
That’s a positive trend, but Bray warns that without a substantial and permanent recovery in the local job market, prices may remain low. If inventories in this key $250,000-and-below price range do indeed tighten further, it could spur new development of many of the “paper lots” that have been sidelined since the market turned south, Bray believes.
Paper lots are properties that were previously planned by developers but remain undeveloped and exist solely on paper as lots and streets. Many of the area’s paper lot inventories can be traced to the real estate heyday that peaked in 2005, when 1,525 building permits were pulled in Mesa County.
But looking ahead, the momentum from last year seems to be carrying over into the first part of this year. Through February, the number of building permits pulled in Mesa County is up this year over last — 230 to 224 year-to-date, according to the county.