Inflation is still a hot topic but this week, we took a peek at what’s on the way in terms of new housing. And the easiest way to see the future? Residential building permits.
This is Week 3 of a special version of What’s Working Housing. There are still some inflation updates below, plus a new report showing that business leaders are getting much more pessimistic about the economy. Most believe we’re already in a recession or will be soon.
But back to housing, 30-year fixed rate mortgage rates had dropped to 5.5% on Thursday, according to Mortgage News Daily. That’s back to what the average rate was a week before the Federal Reserve increased interest rates in mid-June. But snagging a lower interest rate doesn’t mean much if there aren’t enough homes to buy. Enter the home builders.
So far in 2022, Colorado has approved more building permits each month compared to the same period before the pandemic, meaning the housing market is rebounding in Colorado.
March saw a high of 5,700 permit approvals, and the state was above 4,000 approved permits each month between January and May, according to the latest available census data. In 2019, permits were in the mid-3,000s for the same period.
Even though Colorado’s population has exploded in the past decade, the number of new housing permits was lower than in the past. In the early 2000s, new construction was at its peak. May 2001 saw 5,322 building permit approvals.
But that didn’t last, and we’ve seen lags over the past two decades.
Since a dip during the Great Recession — January 2009 was the lowest point, when only 641 building permits were approved — Colorado’s housing economy has slowly been rebounding.
We’ve seen steady growth since 2010, but a construction labor shortage has made it tricky for builders to keep up with demand in Colorado.
Still, all signs suggest that the housing market is rebounding in 2022. Here are a few takeaways:
- Building permit approvals are reaching both pre-pandemic and pre-Great Recession levels, rivaling 2001 numbers.
- March saw a high point, with 5,711 permit approvals.
- Even throughout the pandemic, approved building permits continued to rise, with the only significant dip being 2,811 approved permits in May 2020.
Results: Homeowners vs. renters
In last week’s What’s Working housing survey, we got a good glimpse of who is reading this weekly economy column. Or, at least, people who participate in surveys.
The overwhelming majority, 89.1%, are homeowners who are very glad they own a house. A smaller group of those homeowners refinanced at a low rate in the past year. A minority said they’ll sell and move if the right offer came along.
“I bought my home when I worked as a Denver paramedic and I never would have been able to buy without my VA loan. Even my one-bedroom condo,” said one respondent named Patrick who wants more coverage of the cost and value of homeowner associations (“I think that they are a racket,” he added.)
Others were also concerned about other costs of owning a house, including rising insurance premiums and higher property taxes. But a handful mentioned they just cannot afford to move.
From the renter comments: “We need to be building more housing,” said Luke in Golden. Leslie from Westminster chimed in, “It is difficult to find anyone to help me find affordable housing.”
Michelle Albert from Boulder owns a condo that’s part of the city’s affordable housing program. But the flipside is there’s been minimal appreciation and it’s tiny. She can’t afford to move. “I desperately want to live in a bigger place, but I feel trapped by forces beyond my control.”
Take the housing survey: cosun.co/WWhousing
What about roommates?
Among the responses of last week’s housing survey, many pointed out that they could only afford housing because of help from their partner.
“The largest caveat to these renting/owning statistics is the roommate/partner problem. I could not afford my house solely on my income, but my girlfriend makes about the same as I do and pays half the mortgage,” said Jake from Lakewood in response to the survey. “This drops the mortgage payment into an affordable range.”
Others critiqued that finding housing or renting can be cheaper if leasing a studio apartment, or finding a roommate to split costs. So let’s talk about that.
Shift Research Lab saw that in 2017, 27% of Colorado households were “doubled up” — living with friends, roommates, or family members — compared to 20% in 2006. How are we doing five years later?
The number of adults living with an unmarried partner increased by 4%, with people living alone — in, let’s say, a potentially cheaper studio — also gradually increasing to 11.2% in 2021. Even more interesting is that the percentage of adults living with a spouse decreased by 5% over the past two decades.
A possible solution to issues in affordability is home-sharing. Denver-based Silvernest pairs empty nesters with roommates around the country, partnering with nonprofits to make affordable housing accessible. The company is an example of the many turning to the increasing population interested in home-sharing as a solution
“Over the last six months, on the heels of COVID, with rising interest rates, inflation just across the board, It feels to us like the housing crisis is just getting more and more acute each month,” Silvernest president Riley Gibson said. “The idea of home sharing is that it could help stabilize finances of older adults, help reduce isolation, provide extra help around the house, and in tandem, take all this housing inventory that’s sitting there unused and make it available.”
That unused housing inventory is key for a younger population who can’t afford to buy their first house due to the increasingly inaccessible cost of real estate.
Check back next week on ColoradoSun.com for the full report.
More housing stories
→ Aspen City Council passed legislation easing the development process for affordable housing and restricting short-term rentals, The Sun’s Jason Blevins reported >> The Colorado Sun
→ The pain of rising mortgage rates when you’re waiting for your home to be built >> NPR
Inflation concerns but still hiring say local business leaders
Economists at the Leeds Business School at the University of Colorado took a peek into the future and discovered the state’s economy wasn’t as strong as they thought — or at least the perception of what’s to come.
And by “peek,” that means they polled 216 business leaders in Colorado and asked if they’re still hiring, raising wages, ordering goods, paying more, cutting expenses, etc. Decisions made today obviously impact the future.
“Business leaders pointed to inflation as the main reason for their pessimism,” Rich Wobbekind, senior economist at Leeds’ Business Research Division, said during a news conference on Wednesday. “Over 70% of the panelists reported that inflation already has at least moderately impacted their businesses.”
Their costs went up. So they raised prices. And passed it on to customers.
The majority felt that if Colorado and the U.S. isn’t already in a recession, we will be within the next year.
All six economic indicators were negative for the third quarter, which means the outlook of the state and national economy, sales and profits, hiring and expenditures were below 50. The results were the fifth-lowest rates in the Leeds Business Confidence index’s 20-year history.
Even with all the pessimism, many are still hiring workers and 56% had raised wages or planned to. While that impacts inflation — 52% said they’re just going to increase prices — “About half of the firms are continuing to go into the hiring phase and that’s good news for the general economy,” Wobbekind said.
This isn’t like the last recession, the Great one, where foreclosures were rampant and people lost jobs. There’s still a large number of jobs posted on the state’s job board (ConnectingColorado.com had 118,329 open jobs as of June 30) and while job growth has slowed, it’s still growing. Personal income has grown every month since September 2021 and wholesale inventories remain solid, though retail sales were negative. In fact, taking all that data and feedback and the Business Research Division’s economic model suggests a growth rate of 3.3% this year.
The pessimism in this forecast could be self-fulfilling, he admitted.
“If enough of us are saying there’s a recession on the horizon — and I have been suggesting there’s a recession on the horizon in 2023 — then business leaders look at this, you report on this and people start to hunker down.”
“The vast majority of those indicators, particularly employment and personal income, are really showing a strong sense of not a recession now, maybe a recession later,” Wobbekind said. “If recession is on the horizon, It’s further out on the horizon. It isn’t here now.”
Colorado is holding steady at an average of $4.906 per gallon of regular gasoline. But that means the state is higher than the national average of $4.842, according to gas prices tracked by AAA. Demand has decreased and that’s why gas prices, at least for most of the other states, declined.
That’s a change from about six weeks ago when Colorado had the 10th lowest average gas price in the 50 states and Washington, D.C., average. We are now the 19th most expensive.
And remember that suggestion by the Biden administration to put the federal gas tax on hiatus for 90 days? He also asked states to pause theirs. Sun reporter Jesse Paul reported Friday that congressional Democrats like House Speaker Nancy Pelosi are not yet convinced. Colorado’s U.S. representatives had the same response as U.S. Rep. Diana DeGette’s office, saying, “she just needs to be convinced that a temporary pause of the gas tax will actually lead to lower prices at the pump and not just further pad big oil’s bottom line.”
→ Colorado’s congressional delegation is split on Biden’s federal gas tax pause >> Read
→ 20% pay raises, flexibility and birthday parties: Fast food jobs aren’t what they used to be, reports Brammhi Balarajan, who was invited to a monthly staff birthday party at a McDonald’s in Longmont. Maybe McDonald’s franchisee Sean Connelly is on to something. >> Read
→ Pay $600 for gas or $450 to rent and fuel a Tesla? Uber, Lyft drivers are switching to electric vehicles because of rising gas prices. >> Bloomberg
→ What are the chances of a recession? Thoughts from other economists. >> New York Times
→ There’s still time, take the What’s Working inflation survey: cosun.co/ww-inflation
Other working bits
→ Grants for social-equity and Black-led nonprofits: Black Resilience in Colorado, which started on Juneteenth 2020, has raised more than $3 million to help Black-owned organizations and entrepreneurs. Sun reporter Tatiana Flowers digs into where some of that money is going and the significance of the organization’s work. >> Read
→ $1.2 million to build more apprenticeships: To combat the labor shortage, the Colorado Office of the Future of Work awarded $1.2 million in grants to 25 organizations across the state. The funding comes from a grant the state received last year from the U.S. Department of Labor’s Scale-Up grant program. As part of the funding, 12 new apprenticeship programs will be added and 13 expanded in the state and 1,000 new jobs will be created by June 2025. Recipients include Activate Work, Blind Institute of Technology and Rocky Mountain Masonry Institute. >> See winners and apply for the next round
→Who’s hiring? King Soopers pharmacy: The grocer is hosting a pharmacy job fair July 6 and needs 150 certified or non-certified pharmacy technicians. Why? They’re already gearing up for the flu season or next COVID-19 wave. Pay starts at $16.75 for those who aren’t certified and $19.15 an hour for those who are. Clinical positions start at $22.50 an hour. To attend the job fair, show up either at the King Soopers corporate office at 66 Tejon St. in Denver or the Fairfield Inn and Suites by Marriot at 24192 E. Prospect Ave in Aurora, between 8 a.m. to 11 a.m. and 2 p.m. to 5 p.m. >> Jobs
Trying to fill a job or several? Share the details, including wages and benefits, and we just may mention it: cosun.co/heyww
It’s a holiday weekend and we’re juggling vacations, so there won’t be a What’s Working next week. But we’ll be back — with a new delivery in your inbox if you’re on our mailing list — on July 16. ~ marvis, brammhi & tamara
What’s Working is a Colorado Sun column for readers navigating today’s economy. Read the archive, send a message and don’t miss the next one. Get this free newsletter in your inbox by signing up at coloradosun.com/getww
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Miss a column? Catch up:
- What’s Working: Colorado employers say there’s still a labor shortage even as more jobs are filled
- What’s Working: Colorado’s economy is still growing, but a slow down has added to recession fears
- What’s Working: More home sellers cutting for-sale price in metro Denver, Colorado Springs
- What’s Working: Here’s how the Front Range housing market slowed over a few weeks as interest rates rose