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Metro home building dives

34% drop in '07 permits may cost up to 10,000 jobs

By John Rebchook, Rocky Mountain News (Contact)

Published February 26, 2008 at 12:05 a.m.

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Mounds of dirt are piled in a lot next to some newly built homes at the Belle Creek subdivision in Commerce City on Monday.

Photo by Dennis Schroeder / The Rocky

Mounds of dirt are piled in a lot next to some newly built homes at the Belle Creek subdivision in Commerce City on Monday.

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New home construction in the Denver area last year fell to its lowest level in 16 years, as builders cranked down on construction because of a sluggish and overbuilt market.

Permits for single-family homes dropped 34 percent to 10,986 in 2007, down from 16,263 in 2006, the Home Builders Association of Metro Denver said.

A record 20,420 permits were pulled in 2005.

"Certainly, that is a major cause of concern when you are going to be down (billions of dollars in construction) over the next year or two in any industry," said Tom Clark, executive vice president of the Metro Denver Economic Development Corp.

The report includes attached and detached homes. Detached homes make up about 65 percent of the permits pulled in Denver and its surrounding communities.

The home building industry in Denver and across the nation is quickly shedding jobs because fewer homes are being built.

Denver-based MDC Holdings, in a recent SEC document, said it cut its work force in half at the end of 2007, from its peak two years ago.

And MDC, parent of Richmond American Homes, sold and closed only 818 homes in Colorado last year, a 44 percent drop from the 1,463 it sold in Colorado in 2006.

At an average price of $346,300, that represents a $223.4 million drop in sales volume.

"It is tough out there," said Roger Reinhardt, executive vice president of the Home Builders Association of Metro Denver.

"It wouldn't surprise me if we've lost 10,000 jobs, or even beyond that," from peak employment, he said.

Reinhardt said the market is different from what it was in the last housing recession in the late 1980s, primarily because of the nature of the companies that are doing most home construction.

"This time, we have a lot of big, publicly traded national builders, while in the late '80s we had a lot more mom-and-pop builders, and a lot of those simply went out of business," he said.

Reinhardt said that many subcontractors could land on their feet by switching either to commercial construction, which is still strong, or to home renovations.

"Remodeling is still strong in the metro area," he said. "Overall, I think we have seen the worst of it. Our problems started earlier than in most places in the country, so hopefully we will be one of the first ones to emerge."

Economist Patty Silverstein said that an estimate of 10,000 lost jobs seems too high, but she said no good data exists that tracks the home-construction market. Silverstein, president of Development Research Partners in Littleton, said she could see a potential drop of 5,000 direct and indirect jobs in the industry.

She said a drop in home construction spreads to related businesses ranging from furniture to granite countertop and tile and carpet companies.

"There's a pretty big multiplier effect," Silverstein said. "There's going to be some short-term pain. But on a macro level, this is exactly what needs to happen. We need to whittle down the unsold inventory to help stabilize prices for existing homeowners."

She said large infrastructure projects, such as FasTracks, will take away some of the sting of losing home construction jobs.

Overall, she expects about 21,000 jobs to be created in the Denver area this year, a 1.4 percent increase from 2006. She thinks that will outperform national job growth, which she projected to grow by about 1 percent.

rebchookj@RockyMountainNews.com or 303-954-5207

Comments

  • February 26, 2008

    6:51 a.m.

    Suggest removal

    italiaboy9 writes:

    Loss of construction work = no jobs for the illegals. Sorry.

  • February 26, 2008

    8:18 a.m.

    Suggest removal

    T1anda writes:

    Just breaks one's heart doesn't it? Now if everyone would boycott all fast food joints for a year or two.....

  • February 26, 2008

    8:37 a.m.

    Suggest removal

    HolierThanThou writes:

    The good news is that the mortgage company will be able to make money on your foreclosure when the inventory of new homes gets sold off.

    The one great success of Bush and the conservatives has been their war on working Americans and decent pay. Keep believing that corporate executives are your friends and labor unions are bad. Billions of dollars aren't enough to keep your masters happy. They need true believers.

    Jobs eliminated, jobs off-shored, lousy pay, no benefits, shoddy healthcare, foreclosure, bankruptcy -- all while making record-breaking bonuses and profits with nary a peep from you... mission accomplished.

  • February 26, 2008

    8:47 a.m.

    Suggest removal

    snuffalupagus writes:

    I agree w/ everything said above!!!

  • February 26, 2008

    11:46 a.m.

    Suggest removal

    Theoldguy writes:

    Check out your local job site for "five fingered discount" on building supplies.

  • February 26, 2008

    12:26 p.m.

    Suggest removal

    anya writes:

    The prettiest sight these days is a Texan leaving Colorado with a Californian under each arm.

  • February 26, 2008

    12:42 p.m.

    Suggest removal

    gwats writes:

    The last time I was on a new home site during construction, I did not hear a word of English and every house had a crew singing along with the portable stereo in Spanish. I was the only Anglo for 4 blocks. If it's affecting us, think about the ripple effect among the undocumented and the illegals. Arizona may have had a good point with those new laws penalizing employers who knowingly hire the illegals.

  • February 26, 2008

    3:51 p.m.

    Suggest removal

    pwern writes:

    Message to HolierThanThou: Stop blaming your problems on everyone else and take some responsibility for your own actions, and maybe you won't be such a failure in life. Try paying your bills on time, and you won't lose your home. Try taking advantage of the FREE education in this country to become skilled in something, and then you can get a job that actually contributes to the creation of something valuable. Instead of relying on some worthless union to wipe your rear-end for you and promise you all kinds of juicy benefits that you don't deserve, try working hard enough that you become valuable to your employer on your own merits. It's amazing how much harder it is to fail when you accept responsibility for yourself instead of naming a million different scapegoats to explain your failure. Loser!

  • March 15, 2008

    4:40 p.m.

    Suggest removal

    prk166 writes:

    Gotta love Fastracks, not only is it a $7 billion transit project but it's a jobs project and re-devlopment project. When is RTD going to take the "trasit" out of it's name and add something that better defines what it's about?