Colorado's Fast Recovery Brings Growth And A Housing Crunch
Northern Colorado is the fastest growing part of a fast-growing state. A recent release from the U.S. Census Bureau found that Greeley was the fastest growing area in the country, at 2.6 percent. During that same period, from July 2013 to July 2014, Fort Collins was the 12th fastest growing, at 2.4 percent.
While growth is often seen as good for the economy, the speed of the change is creating a housing crunch. From Denver to Fort Collins, renters and buyers are being squeezed.
Essentially, this is a supply and demand problem. There are too many buyers and renters, and not enough apartments and homes.
"The growth in the state economy being amongst the top five the last three years, continues to inspire a lot of migration into the state, leading to population growth," said economist Richard Wobbekind, of the University of Colorado's Leeds School of Business.
While Colorado is recovering quickly from the recession, its impacts are still playing out in housing availability. Before the recession, new housing units were being built at a rate of 35,000 to 40,000 per year, which is considered about normal, said Wobbekind. During the recession, the rate fell. A lot.
"It dropped all the way down in 2009, in the depths of downturn, to 9,000 units."
"...we think it is a development issue for Colorado. Colorado is becoming an expensive state to live."
That means in 2009 only 25 percent of the normal amount of housing units were created. The numbers stayed low for a few years, putting local housing stock at a deficit.
But population growth rates for the Front Range didn't go all that low during the recession. Most counties from the Denver Metro area northward saw growth around 1.5 percent or more. While that's not as fast as the area had been growing, it's not shabby either, said state demographer Cindy DeGroen.
"The nation grows at or around 1 percent per year," she said. "Anything between 1 and 2 percent is still growth."
For metropolitan areas like Fort Collins, with more than 100,000 people, growth between 1 and 2 percent is pretty strong, she added.
If the problem is supply and demand, one way to ease the pressure is for developers to build new houses. While there are a lot of new developments in the works, builders are also being cautious, said Kelly Moye, spokeswoman for the Colorado Association of Realtors.
"Builders also have this memory of what it was like five, six, seven years ago when they had all of these spec homes and no buyers for them and they lost a lot of money on that," Moye said. "So now, as they are coming back into the market they are being careful, maybe a little too careful."
What this means is a lot of builders aren't building homes unless a buyer has already put a contract on them. The lack of willingness to build homes on spec means new construction is not really helping add to the supply of homes.
The Colorado Association of Realtors keeps an affordability index for Northeast Colorado, which includes Boulder, Larimer, Weld, Morgan, and Logan counties. The affordability index for that region's housing balances wages, home prices, and interest rates. A higher index means housing is more affordable. For single family homes, the index hit a peak in 2012. It has been going down steadily ever since.
This can be bad for the overall economy. When people spend more of their income on housing, they spend less of it on things like eating out and buying shoes and clothes. Local businesses depend on that spending, and local governments get a lot of their income from sales taxes on those purchases.
If wages don't start to catch up with home prices, said Wobbekind, that might be a cause for concern. Wages have not increased significantly over the past five years, but housing prices for both renting and buying have been going up for several years.
"You have people saying $400,000 for a home is a reasonable entry level. That is a lot of money even with great mortgage rates. It's a scary picture," he said. "So I do think this is an issue, and we think it is a development issue for Colorado. Colorado is becoming an expensive state to live."