Breckenridge Real Estate Blog

As the slowdown in the housing market, combined with the ongoing credit crunch, continues to squeeze the economy, individuals who work in the housing market or affiliated industries are being forced to make adjustments. Even though the trickle-down effect from the housing slowdown is affecting seemingly unrelated industry sectors over, Colorado is expected to weather the storm.
With the exception of Denver, the number of building permits issued in the metro area during the first four months of the year plunged, and the nation’s largest homebuilders reported losses across the board during the second quarter. Year-over-year growth in construction employment in Colorado went negative in January and has stayed that way every month since, except for February. It is the worst run since the Colorado economy came out of the late-2001 to early-2004 technology and telecom slump. Contractors are seeing a slight increase in activity as the large homebuilders try to make their year-end projections.

MDC Holdings, parent of Richmond American homes, reported a net loss of $106.1 million in the second quarter, a sharp reversal from the $76.5 million it made in the second quarter of 2006. D.R. Horton lost $823.8 million during the quarter, Beazer Homes reported a $123 million loss, Pulte Homes lost $507.6 million, and Ryland Group shed $52.4 million.

A national housing meltdown that has roiled the markets and shaken consumer and investor confidence has a growing number of economists and businesses nervously contemplating the likelihood of a recession. Recessions are typically defined as two consecutive quarters of declining GDP, the Commerce Department’s main measure of U.S. economic output.

The local economists see Colorado as better positioned than many other parts of the country to weather a downturn.

“If there is a recession, the local economy won’t be hurt as badly as in the last one (in 2001),” predicted Bill Kendall, president of the Center for Business & Economic Forecasting in Denver.
he 2001 recession was relatively mild on a national level, but it hit Colorado, which relied heavily on hiring in technology and telecom, hard.

The state lost more than 95,000 jobs between December 2001 and December 2003, and it didn’t reach its old employment highs until late 2005 and 2006.

Some sectors of the economy are still trying to find a bottom. After peaking in February 2001 at 49,100 jobs, there were only 27,600 telecom jobs in the state in July.

Economists contend Colorado should weather a real estate-driven downturn better than the oil and gas bust of the 1980s and the technology and telecom bust earlier this decade.

Home values in metro Denver have risen only about 40 percent the past seven years, compared with a doubling in home values nationally and even higher gains in formerly hot housing markets such as San Diego, Miami and Las Vegas, according to the S&P/Case-Shiller Home Price Indices. Nor does it appear that construction employment got out of hand in Colorado. Construction jobs never reached the peak of 176,100 positions hit in August 2001. There has been a 33 percent drop in new-home sales in the metro area which has many home builder’s on edge.