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Fred Crowley\'s Quarterly Report
 

Fred Crowley\'s Quarterly Report

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It appears our market has bottomed out! So when is the best time to buy? NOW!

It appears our market has bottomed out! So when is the best time to buy? NOW!

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    Fred Crowley\'s Quarterly Report Fred Crowley\'s Quarterly Report Document Transcript

    • College of Business and Administration University of Colorado at Colorado Springs 1420 Austin Bluffs Parkway, PO Box 7150, Colorado Springs, CO 80933-7150 TM Quarterly Updates and Estimates Volume 7, Number 4, April 2009 Fred Crowley - Senior Economist Update on the El Paso County Economy The Business Conditions Index (BCI) appears to have halted its downward trend. The BCI now stands at 69.48, up from its February value of 68.62. The nominal improvement in the BCI and its steady performance since November 2008 suggest that the local economy is likely at the bottom of the current recession. The most important measure of the area’s economic health might be employment. Since employment tends to lag the business cycle, the Forum expects several months of slow economic activity are ahead for the local economy. While some nominal variations around the emerging trend are expected, the Forum does not expect the Business Conditions Index El Paso County (March 2001 = 100) 120 110 Forum Business Conditions Index 100 90 80 70 60 Mar-04 Sep-04 Mar-05 Sep-05 Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Business Conditions Index 3 Month Moving Average 1 The Business Conditions Index (BCI) is a geometric index of ten seasonally adjusted data series. The El Paso County data are single family and town home permits, new car sales, employment rate, foreclosures, ES202 employment and ES202 wages and salaries. Colorado Springs data are sales and use tax collections and airport enplanements. University of Michigan’s Consumer Sentiment and the Federal Reserve Bank of Kansas City Manufacturing Index are non-local indicator in the BCI. The BCI is in- dexed to March 2001 = 100. All raw series are seasonally adjusted by UCCS Southern Colorado Economic Forum using the De- partment of Commerce X12 adjustment process. 1 © Southern Colorado Economic Forum - Quarterly Updates and Estimates - April 2009
    • College of Business and Administration University of Colorado at Colorado Springs 1420 Austin Bluffs Parkway, PO Box 7150, Colorado Springs, CO 80933-7150 TM Table 1: Business Conditions Index Components - All Values Indexed to Mar 2001 = 100 Colorado El Paso S prings El Paso El Paso El Paso COS County U Of Kansas El Paso 2% S ales County County El Paso County Enplane- S F & TH Mich Con City Fed Employ- & Use Car Fore- County Real Mfg Index ment Rate ments Permits S ent Tax S ales closures Employed Wages BCI Dec-07 86.56 31.12 82.31 136.40 98.50 107.58 80.40 98.30 111.41 103.77 88.44 Jan-08 93.20 35.03 81.01 150.22 98.36 107.79 88.31 98.60 112.85 103.83 91.90 Feb-08 93.12 30.85 77.06 139.76 98.30 99.40 79.50 97.85 112.97 104.42 87.96 M ar-08 90.14 28.74 75.77 138.27 97.97 104.12 71.12 97.98 113.08 104.84 86.29 Apr-08 87.24 28.47 68.75 149.48 98.09 101.79 79.27 98.05 112.65 99.33 86.01 M ay-08 93.34 36.69 65.54 152.09 97.82 101.78 68.99 98.42 111.47 99.10 87.23 Jun-08 85.60 23.83 60.49 147.61 97.83 110.33 76.78 97.59 109.16 98.12 83.14 Jul-08 81.95 30.58 66.09 169.28 97.68 93.81 66.95 98.13 108.40 98.57 84.26 Aug-08 84.91 20.03 68.98 146.49 97.50 103.75 63.70 98.99 108.27 98.33 80.67 Sep-08 80.47 28.26 78.38 125.56 97.42 99.18 67.74 98.94 108.36 98.03 82.93 Oct-08 86.28 17.50 65.90 99.03 96.95 93.25 58.48 97.92 108.16 103.60 75.11 Nov-08 79.98 17.29 61.41 75.11 96.99 94.39 54.37 98.21 108.47 103.31 71.51 Dec-08 79.57 16.87 66.14 76.98 96.34 91.51 57.76 98.26 107.59 101.94 72.01 Jan-09 79.02 17.92 65.64 62.78 95.86 89.24 48.83 98.17 107.00 100.35 69.34 Feb-09 78.56 17.71 61.71 59.79 95.24 90.86 49.96 97.78 106.68 99.92 68.62 M ar-09 77.37 17.50 62.31 64.65 94.99 98.11 50.07 97.94 106.14 99.10 69.48 M arch 2009 Compared to: Feb-09 -1.51% -1.19% 0.97% 8.12% -0.25% 7.99% 0.22% 0.16% -0.51% -0.82% 1.26% Dec-08 -2.77% 3.75% -5.79% -16.02% -1.40% 7.22% -13.33% -0.32% -1.35% -2.79% -3.52% Sep-08 -3.85% -38.06% -20.51% -48.51% -2.49% -1.07% -26.09% -1.01% -2.05% 1.09% -16.22% M ar-08 -14.17% -39.11% -17.77% -53.24% -3.04% -5.77% -29.61% -0.04% -6.14% -5.47% -19.48% Real wages in El Paso County are estimated by the Forum for the period Oct '08 through M ar '09 economy will deteriorate beyond its current position. The economy should experience a boost from the troops who returned in February and the Fort Hood troops scheduled for reassignment to Fort Carson in this summer. See the January 2009 QUE for a discussion of the military’s impact on the local economy. http:// www.southerncoloradoeconomicforum.com/ The current quarter saw all BCI indicators below their respective year ago values. However, five of the ten indicators are now higher than their previous monthly values. This compares favorably with two of the ten indicators being higher than their respective December 2008 values. 2 © Southern Colorado Economic Forum - Quarterly Updates and Estimates - April 2009
    • College of Business and Administration University of Colorado at Colorado Springs 1420 Austin Bluffs Parkway, PO Box 7150, Colorado Springs, CO 80933-7150 TM Analysis of the El Paso County Single Family Permit Trends Residential Housing Market in El Paso County 600 The Forum noted the near bottoming of single family permit activity in the 4th 500 quarter of 2008. Evidence since then sup- Permits Issued 400 ports the earlier observation. Permit activ- 300 ity is flat to slightly up. Measurable growth is likely to elude us until late in 200 2009. 100 0 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Seasonally Adjusted Single Family Permits 3 Mo Moving Avg SA S ource: Pikes Peak Rgl Bldg Dept, and UCCS S outhern Colorado Economic Forum Permit activity remains significantly be- Single Family-Detached low its past average. Building Permits in El Paso County 450 392 389 400 351 344 317 350 305 273 300 245 220 221 218 215 250 188 180 200 136 134 108 150 97 97 78 100 71 69 66 55 53 43 50 0 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Monthly Average: 3/05-3/08 Last 13 Months: 3/08-3/09 S ource: Pikes Peak Rgl Bldg Dept, and UCCS S outhern Colorado Economic Forum Weakness in townhome permit activity Single Family-Townhomes continues to characterize this less expen- Building Permits in El Paso County sive form of home ownership in the 113 120 county. Townhome permit activity is well below its past average. 100 89 82 80 59 55 60 52 49 48 48 47 45 41 41 38 37 40 32 29 28 28 25 24 20 17 20 8 8 4 0 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Monthly Average: 3/05-3/08 Last 13 Months: 3/08-3/09 S ource: Pikes Peak Rgl Bldg Dept, and UCCS S outhern Colorado Economic Forum 3 © Southern Colorado Economic Forum - Quarterly Updates and Estimates - April 2009
    • College of Business and Administration University of Colorado at Colorado Springs 1420 Austin Bluffs Parkway, PO Box 7150, Colorado Springs, CO 80933-7150 TM Compared to the last several years, the Single Family & Townhomes most recent thirteen months of private Building Permits in El Paso County residential building activity have remained 600 505 weak. The normal rise in activity in the 478 500 late spring to early summer appears to be 433 399 present in 2009. A modest non-seasonally 369 353 400 331 adjusted upturn can be seen in the accom- 293 268 260 258 258 300 panying chart. While offering a glimmer 229 209 of hope, it is not sufficient to conclude the 171 168 157 200 125 117 local housing market is better. 103 99 77 77 70 100 63 60 0 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Monthly Average: 3/05-3/08 Last 13 Months: 3/08-3/09 S ource: Pikes Peak Rgl Bldg Dept, and UCCS S outhern Colorado Economic Forum Compared to their past year to date levels, Single Family Detached Permits cumulative single family permits continue in El Paso County - Year to Date Comparison to be well below their past average. This is expected to improve toward the latter 2,268 2,268 2,177 2,500 2,070 part of 2009. 1,947 1,802 2,000 1,619 1,440 1,223 1,230 1,500 974 1,000 714 441 500 220 190 119 66 0 0 0 0 0 0 0 0 0 0 Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Average Cumulative Permits: 2006 - 2008 Actual Permits: 2009 S ource: Pikes Peak Rgl Bldg Dept, and UCCS S outhern Colorado Economic Forum Multi-family permit activity finished 2008 Multi-Family Housing Units with several large projects. Permit activ- in El Paso County - Year to Date Comparison ity was up 17.4 percent over its past an- nual average. Vacancy rates in the 10 per- 500 453 cent range and declining real rents suggest 450 386 386 no additional multi-family housing is 365 358 400 340 328 needed at the current time except for se- 350 284 300 lect pockets in the areas surrounding Fort 250 Carson. 166 200 109 150 93 71 100 40 21 50 16 17 12 0 0 0 0 0 0 0 0 0 0 Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Average Cumulative Permits: 2006 - 2008 Actual Permits: 2009 S ource: Pikes Peak Rgl Bldg Dept, and UCCS S outhern Colorado Economic Forum 4 © Southern Colorado Economic Forum - Quarterly Updates and Estimates - April 2009
    • College of Business and Administration University of Colorado at Colorado Springs 1420 Austin Bluffs Parkway, PO Box 7150, Colorado Springs, CO 80933-7150 TM MLS Activity Year to Date Sales (Pikes Peak Region) Single family home sales in the Pikes 10,075 10,075 12,000 9,450 Peak Region were down 28.5 percent from 8,788 10,000 8,339 8,030 the annual average for 2005-2007. Low 7,255 interest rates are helping refinancing deci- 8,000 6,281 Homes Sold 5,237 sion but have not contributed to signifi- 6,000 4,124 cant home purchase activity as of yet. 3,079 4,000 This is expected to change with the rising 2,169 1,483 1,286 affordability of housing. In 2008, the 2,000 917 628 413 housing affordability for El Paso County 0 0 0 0 0 0 0 0 0 0 was approximately 134, up from 101 in Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- 2006. 08 09 09 09 09 09 09 09 09 09 09 09 09 Monthly Average: 12/06-12/08 Last 13 Months: 12/08-12/09 S ource: Pikes Peak REALTOR S ervices Corp. and UCCS S outhern Colorado Economic Forum Monthly Single Family Home Sales Home sales activity continues to struggle. (Pikes Peak Region) The latest monthly data indicate sales are running approximately 36 percent below 1,600 1,288 the past average. A number of mortgage 1,191 1,400 1,172 1,172 lenders have reported increased activity 1,022 Single Family Homes Sold 1,200 from first time buyers who are eager to 977 938 917 886 883 867 1,000 840 take advantage of the stimulus package 805 787 778 772 734 722 800 658 649 tax credits. 628 566 504 499 495 600 413 400 200 0 Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- -200 08 08 08 08 08 08 08 08 08 08 09 09 09 Historical Average: 3/05-3/08 Last 13 Months: 3/08-3/09 Series3 S ource: Pikes Peak REALTOR S ervices Corp. and UCCS S outhern Colorado Economic Forum The supply of single family homes for sale Active Listings of Homes in the Pikes Peak Region is significantly (Pikes Peak Region) lower than year ago figures (down 13.3% 8,000 6,595 6,544 6,396 from March 2008’s historical average). 6,323 6,175 6,030 7,000 5,849 5,856 5,829 5,841 5,710 5,642 5,547 5,520 March 2009 listings were approximately 8 5,360 5,331 5,185 5,079 4,996 6,000 4,957 4,981 4,951 4,925 4,849 4,722 4,663 percent below its historical three year av- Active Listings 5,000 erage. If this continues, the decrease in 4,000 the supply of housing for sale is expected to contribute to price stability among re- 3,000 sale homes over the next six to nine 2,000 months. 1,000 0 Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- 08 08 08 08 08 08 08 08 08 08 09 09 09 Historical Average: 3/05-3/08 Last 13 Months: 3/08-3/09 S ource: Pikes Peak REALTOR S ervices Corp. and UCCS S outhern Colorado Economic Forum 5 © Southern Colorado Economic Forum - Quarterly Updates and Estimates - April 2009
    • College of Business and Administration University of Colorado at Colorado Springs 1420 Austin Bluffs Parkway, PO Box 7150, Colorado Springs, CO 80933-7150 TM The average price of an MLS facilitated Average Sale Price of a Home home sale has trended down by approxi- (Pikes Peak Region) mately 5 percent since March 2008. This 350,000 263,226 264,367 262,462 261,453 258,080 256,829 256,057 supports the general consensus that the 251,543 252,549 252,502 249,590 246,520 245,140 245,049 243,346 243,009 239,578 239,385 235,098 300,000 230,012 227,376 223,025 Average Price of Homes Sold 213,466 local housing market is soft. The average 212,549 206,608 198,644 250,000 sales price of homes that were sold is not the same thing as the average price change 200,000 for homes. A better measure is believed 150,000 to be the same house resale price change 100,000 from the Office of Federal Housing Enter- 50,000 prise Oversight. This measure indicates housing prices declined by 1.8 percent 0 Mar- Apr- May- Jun- Jul- Aug- Se p- Oct- Nov- Dec- Jan- Feb- Mar- from December 2008 to December 2009. 08 08 08 08 08 08 08 08 08 08 09 09 09 Historical Average: 3/05-3/08 Last 13 Months: 3/08-3/09 S ource: Pikes Peak REALTOR S ervices Corp. and UCCS S outhern Colorado Economic Forum Median sale prices also fell over the last Median Sale Price of a Home year. The median price decline approxi- (Pikes Peak Region) mately 4 percent, slightly better than the 5 350,000 percent decline in average prices. 300,000 223,950 223,000 221,417 220,442 Median Price of Homes Sold 218,375 217,577 214,000 211,142 210,000 210,150 207,750 208,046 204,883 205,817 204,283 204,333 203,433 199,900 200,000 193,000 189,000 250,000 187,000 185,000 180,000 177,250 173,000 200,000 150,000 100,000 50,000 0 Mar Apr May Jun Jul Aug Se p Oct Nov Dec Jan Fe b Mar Historical Average: 3/05-3/08 Last Thirtee n Months: 3/08-3/09 S ource: Pikes Peak REALTOR S ervices Corp. and UCCS S outhern Colorado Economic Forum The Forum’s ratio of home sales to total Ratio of Home Sales to Housing Units single family housing units continues to (Indexed to Mar/Nov 2001 = 100) demonstrate signs of stability. The index 0.8 has remained in a steady range since Octo- ber 2008. A notable upward trend is not 0.7 expected for at least 6 to 9 more months. 0.6 0.5 0.4 0.3 Mar-05 Sep-05 Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Home Sales S ource: Pikes Peak REALTOR S ervices Corp. and UCCS S outhern Colorado Economic Forum 6 © Southern Colorado Economic Forum - Quarterly Updates and Estimates - April 2009
    • College of Business and Administration University of Colorado at Colorado Springs 1420 Austin Bluffs Parkway, PO Box 7150, Colorado Springs, CO 80933-7150 TM Foreclosures El Paso County Foreclosure Proceedings The number foreclosures increased 4,602 4,500 5,000 sharply in 2008 as subprime and Alt A 4,500 mortgage loans became more problem- 3,556 3,476 4,000 3,240 A nnual Foreclosures atic. Evidence points to a number of 2,973 3,500 homeowners with second mortgages who 2,554 2,316 3,000 2,275 2,273 are upside down on their mortgages. Ad- 2,088 1,992 1,954 2,500 ditional concerns exist about the rising 1,596 1,406 2,000 number of unemployed workers and their 1,163 1,059 1,003 1,500 959 ability to meet mortgage payments. De- 827 664 590 1,000 499 456 431 spite these concerns, local indicators and 500 the BCI suggest the local economy is on 0 the verge of improvement. Foreclosures 1985 1988 1991 1994 1997 2000 2003 2006 2009* are expected to decline slightly in 2009 to 4,500. Source: El Paso County Public Truste e and UCCS Southern Colorado Economic Forum The Forum first pointed to the inverse re- Single Family Permits and Initiated Foreclosure lation between foreclosures and new sin- Proceedings in El Paso County (Seasonally Adjusted) gle family permits at its 11th Annual 600 600 Southern Colorado Economic Forum in Foreclosures October 2007. Evidence of the relation- Foreclosure Proceedings 500 500 Single Family Permits ship continued through 2008. Until the 400 400 problem in foreclosures is resolved, single 300 300 family construction is not expected to re- bound. 200 200 100 100 Permits 0 0 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Permits Foreclosures Source : El Paso C ounty Public Truste e and UC C S Southe rn C olorado Economic Forum 7 © Southern Colorado Economic Forum - Quarterly Updates and Estimates - April 2009
    • College of Business and Administration University of Colorado at Colorado Springs 1420 Austin Bluffs Parkway, PO Box 7150, Colorado Springs, CO 80933-7150 TM Housing Bubbles The Forum has repeatedly noted that Colorado Springs should not experience a housing bubble. To date, re- sale price trends have declined less than 2 percent over the last 24 months. This is best described as a modest change in housing prices, not a burst bubble. The Office of Federal Housing Enterprise Oversight produces a housing price based on same house sales data. New homes are excluded from the index until they are resold in the market. Over the past five years, housing prices in the Colorado Springs MSA saw the third highest appreciation in Colorado. An energy driven bub- ble drove Grand Junction prices up an unsustainable 59.93 percent over the last five years. Current evidence indicates Grand Junction is at the front end of a housing market correction. If not for Boulder’s recent modest gain in value and the slight decline in values in Colorado Springs, Colorado Springs would have had the sec- ond best housing market in Colorado over the last 5 years. Last 12 Months Last 24 Months Last 60 Months Q3 2007 to Q3 2008 Q3 2006 to Q3 2008 Q3 2003 to Q3 2008 Boulder, CO 2.98% 5.85% 16.00% Colorado Springs, CO -1.79% -1.54% 15.83% Denver-Aurora, CO -0.70% -1.08% 6.34% Fort Collins-Loveland, CO -0.09% 1.29% 8.19% Grand Junction, CO 0.55% 13.62% 59.93% Greeley, CO -7.25% -10.16% -6.58% Pueblo, CO -0.25% -2.04% 10.75% Colorado -0.15% 1.45% 13.89% U.S. -4.47% -3.86% 24.79% 8 © Southern Colorado Economic Forum - Quarterly Updates and Estimates - April 2009
    • College of Business and Administration University of Colorado at Colorado Springs 1420 Austin Bluffs Parkway, PO Box 7150, Colorado Springs, CO 80933-7150 TM Multi-family Market Multi-Family Vacancy Rates in El Paso County The estimated annualized multi-family vacancy rate stood at 9.65 percent for 14 12.18 11.93 2008. Continued new construction, the 11.20 11.18 12 lack of job growth and the sustained de- 10.10 9.65 9.33 10 ployment of troops from Fort Carson con- tributed to this. The Rand institute esti- 8 5.58 mated 40 percent of the troops who live 5.33 6 off base will rent housing. The antici- 3.55 4 pated return of troops and additional troops under BRAC05 are expected to 2 help reduce vacancies in 2009 provided 0 new multi-family construction takes a sab- 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 batical. Source: Colorado Division of Housing, *= Estimated Yearly Rate Higher nominal rents are not expected un- Multi-Family Rents til vacancies drop and inflation increases in El Paso County with a growing economy. 720 699 698 694 700 674 669 669 680 664 659 660 645 640 620 607 600 580 560 Adjusting for inflation, real apartment 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 rents were estimated to be $586 in Decem- Source: Colorado Division of Housing, *= Estimated Yearly Rate ber 2008 compared to $658 in December 2003. Alternatively stated, landlords are Nominal and Real collecting 10.9 percent less real revenue per rented apartment than they did five Apartment Rents in El Paso County years earlier. 750 700 The increase in new multi-family units Average Monthly Rent and the modest increases in occupancy 650 rates suggest real rents for multi-family units will remain weak through the next 6 600 to 9 months. 550 500 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Rent NSA Inflation Adjusted Rent NSA Source: Colorado Division of Housing, UCCS Forum 9 © Southern Colorado Economic Forum - Quarterly Updates and Estimates - April 2009
    • College of Business and Administration University of Colorado at Colorado Springs 1420 Austin Bluffs Parkway, PO Box 7150, Colorado Springs, CO 80933-7150 TM Colorado Springs Airport Trends Enplanement Trends at Colorado Springs Airport (Seasonally Adjusted) Enplanement activity continued its decline through the first quarter of 2009. This 100,000 was expected, given the conditions of the 95,000 Monthly Enplanements economy. Strength is not expected until 90,000 the economy begins its expected recovery 85,000 in latter portion of 2009. 80,000 75,000 70,000 65,000 60,000 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Monthly Airport Enplanements S ource: Colorado S prings Airport, Prepared by UCCS S outhern Colorado Economic Forum Enplanements at Colorado Springs Airport vs Recent A comparison of current monthly enplane- Monthly Average (Seasonally Adjusted) ments vs. their historical monthly average 140,000 Passenger Enplanements per Month reveals the downward trend in enplane- 120,000 90,195 ments has been ongoing for an extended 89,053 87,110 87,132 87,202 85,739 84,300 84,038 83,378 82,722 82,052 81,323 81,064 79,196 79,670 79,476 79,187 77,761 77,289 76,894 76,846 76,355 76,388 75,914 75,679 100,000 74,768 period of time. Reduced numbers of flights, higher fuel/ticket prices last sum- 80,000 mer and a global recession contributed to 60,000 enplanement declines. Travel spikes asso- 40,000 ciated with returning troops are expected in 2009. These are not expected to offset 20,000 the generally lower trend in enplanements 0 at the airport. Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 Monthly Average: 3/05-3/08 Last 13 Months: 3/08-3/09 S ource: Colorado S prings Airport, Prepared by UCCS S outhern Colorado Economic Forum Colorado Springs Airport Enplanements The Forum repeats its expectation that Year-to-Date Trends monthly enplanements will continue to lag 1,016,267 1,016,267 998,347 their recent past averages. At the current 940,382 1,200,000 861,546 trend, enplanements in 2009 are expected 775,418 1,000,000 692,329 to be 4 to 5 percent below 2008 levels. 593,721 800,000 492,438 395,130 600,000 303,762 224,536 197,421 141,063 122,354 400,000 72,128 62,306 200,000 0 0 0 0 0 0 0 0 0 0 Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Monthly Average: 12/06-12/08 Actual: 1/09-12/09 S ource: Colorado S prings Airport, Prepared by UCCS S outhern Colorado Economic Forum 10 © Southern Colorado Economic Forum - Quarterly Updates and Estimates - April 2009
    • College of Business and Administration University of Colorado at Colorado Springs 1420 Austin Bluffs Parkway, PO Box 7150, Colorado Springs, CO 80933-7150 TM Colorado Springs Sales Taxes Colorado Springs 2% Monthly Sales Tax Collections The City of Colorado Springs sales tax 14 collections peaked in 2007. The current 12 decline reflects the recession and the on- 10 going flight to suburbia. In order to see a ($Millions) correction to the tax revenue trend, the 8 City of Colorado Springs needs to host 6 large dollar volume retailers that require 4 population and income densities that are 2 not found in the area’s smaller, satellite 0 communities. These retailers should Jun-04 Oct-04 Jun-05 Oct-05 Jun-06 Oct-06 Jun-07 Oct-07 Jun-08 Oct-08 Feb-04 Feb-05 Feb-06 Feb-07 Feb-08 Feb-09 probably be located along I25 or similar high traffic corridor. S ou rce : C ity of C olorado S prin gs an d UC C S S ou th e rn C olorado Econ om i c Foru m Monthly sales tax collection comparisons with the current and average for the same Sales Tax Collections City of Colorado Springs month over the previous three years indi- 14 cate sales tax collections for Colorado 11.5 Monthly Collections (000,000's) 10.5 12 10.4 10.4 Springs have declined steadily throughout 10.1 9.9 9.8 9.7 9.5 9.5 9.5 9.4 9.2 2008 and into 2009. Current conditions 9.2 9.2 9.1 10 8.4 8.3 8.3 8.1 8.0 8.0 7.8 indicate the City and County will experi- 7.7 7.4 7.0 8 ence consecutive TABOR ratchet down 6 effects for 2008 and 2009. 4 2 0 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Feb/'07 - Feb/'08 Feb/'08 - Feb/'09 Source: City of Colorado Springs and UCCS Southern Colorado Economic Forum Per capita, real sales tax collections have City of Colorado Springs: Inflation Adjusted been on a downward trend for the City of 129.1 Per Capita Sales Tax Collection (1998=100) 126.6 122.1 122.2 140 118.9 115.4 Colorado Springs for several years. Per 111.9 111.9 110.5 106.0 Annual Collection (000,000's) 102.8 capita, real, sales tax collections fell 17 100.0 100.0 100.0 120 98.7 97.0 97.5 94.5 94.5 percent for the City from 1999 through 100 83.2 2008. Additional declines are anticipated 80 for 2009. 60 40 20 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Nominal Sale s & Use Taxes Per Capita, Real Sale s & Use Taxe s Source: City of Colorado Springs and UCCS Southern Colorado Economic Forum 11 © Southern Colorado Economic Forum - Quarterly Updates and Estimates - April 2009
    • College of Business and Administration University of Colorado at Colorado Springs 1420 Austin Bluffs Parkway, PO Box 7150, Colorado Springs, CO 80933-7150 TM New Car Sales Trends New Car Sales Trend in El Paso County 3,500 The downward trend in new automobile sales continued through the first quarter of 3,000 2009. New car sales in 2008 were ap- 2,500 Sales Per Month proximately 22.4 percent below their sales 2,000 levels in 2004 and 32 percent below their 1,500 sales levels in 2001. 1,000 500 0 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Monthly Ne w Car Sale s Source : El Paso C ounty C le rk and Re corde r MSO Re port. Pre pare d by: UC CS Southe rn Colorado Economic Forum On a per capita basis, new car sales are Monthly, Per Capita doing worse than the absolute decline in New Vehicle Sales in El Paso County car sales. Per capita new car sales have 6 declined approximately 51 percent since 5 March 2004 and 57 percent since March Sales per 1,000 People 2001. 4 3 2 1 0 Mar-04 Sep-04 Mar-05 Sep-05 Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Source : El Paso C ounty C le rk and Re corde r, CO DO LA and UC C S Southe rn C olorado Economic Forum New Car Sales in El Paso County Year to Date Trends The Chapter 11 bankruptcy filing by 21,860 21,860 Chrysler was expected by the Forum. GM 25,000 20,475 19,258 18,987 will suffer through its own reorganization, 17,084 20,000 15,144 either formal or informal. Colorado 13,000 11,200 Springs will see several dealerships close 15,000 9,269 as a result of the reorganizations. This is 7,389 10,000 5,544 especially likely if the dealerships brands 3,665 3,317 2,168 are siloed by a single domestic manufac- 2,057 5,000 1,194 turer. 0 0 0 0 0 0 0 0 0 0 Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Monthly Average: 12/06-12/08 Curre nt 13 Months: 12/08-12/09 Source : El Paso C ounty C le rk and Re corde r MSO Re port. Pre pare d by: UC CS Southe rn Colorado Economic Forum 12 © Southern Colorado Economic Forum - Quarterly Updates and Estimates - April 2009
    • College of Business and Administration University of Colorado at Colorado Springs 1420 Austin Bluffs Parkway, PO Box 7150, Colorado Springs, CO 80933-7150 TM National Expectations Annualized Rate for Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 10-Year T-Bond Rate 2.7 2.9 3.1 3.2 3.5 The Federal Reserve Bank of Philadelphia 3-M onth T-Bill Rate 0.2 0.3 0.3 0.4 0.6 February 2009 Survey of Professional AAA Corp Bond Rate 5.1 5.3 5.3 5.3 5.4 Economists moved toward a more opti- Housing Starts Annualized mistic future than their last survey. There -46.9 1.2 39.1 39.6 39.1 Growth Rate % is concern about the economy. However, Industrial Production Index 102.7 101.9 101.9 102.6 103.2 it is tempered with glimmers of light peek- Inflation Rate % -2.7 0.8 1.7 1.8 2.0 ing through the clouds. The results of the Real GDP Growth % -5.2 -1.8 1.0 1.8 2.4 survey indicate the professional econo- Unemp loyment % 7.8 8.3 8.7 8.9 9.0 mists are optimistic the housing market is Employment Growth on the road to correction. Industrial pro- Nonfarm Payroll Emp loyment duction is also expected to rise signifi- -548.4 -311.2 -202.1 -43.0 38.7 Growth (000's) cantly from its March 2009 level of 97.4. Nonfarm Payroll Emp loyment These upward projections are accompa- -4.8 -2.8 -1.8 -0.4 0.4 Growth (%) nied by increases in interest rates, a reflec- tion of expected rising aggregate demand. Recession Likelihood M edian Probability of a 99.0% 75.0% 45.0% 25.0% 20.0% Decline in Real GDP M ean Probability of a Decline 94.4% 74.0% 44.7% 29.9% 21.6% in Real GDP Misery Index The Misery Index, a consumer economic wellness measure, (www.miseryindex.us), defines consumer discon- tent as the sum of the rate of unemployment and the rate of inflation. The lower left chart illustrates the his- torical values for the last ten years through March 2009. The rise in the Misery Index beginning in late 2007 identified the current recession correctly. The Misery Index is currently declining due to a decrease in infla- tion. The decline in inflation is attribute to falling energy and commodity prices. The current 8.5 percent na- tional unemployment rate suggests it is too soon to begin feeling good. Misery Index: Past 13 Months vs. Respective Misery Index Trends Monthly Average of Prior Three Years (Inflation + Unemployment Rate) 14 11.70 11.30 14 11.04 10.52 10.16 12 9.68 12 9.08 8.94 10 8.34 8.18 8.15 8.11 8.12 8.05 8.01 8.03 7.98 7.95 7.97 7.86 7.88 7.88 7.77 7.77 Misery Index 7.63 10 7.29 Misery Index 8 8 6 6 4 4 2 2 0 0 Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- 08 08 08 08 08 08 08 08 08 08 09 09 09 99 00 01 02 03 04 05 06 07 08 09 Monthly Avg of Prior 3 Years Last 13 Months Recession Dates Misery Index S ource: miseryindex.us and UCCS S outhern Colorado Economic Forum S ource: 13 © Southern Colorado Economic Forum - Quarterly Updates and Estimates - April 2009
    • College of Business and Administration University of Colorado at Colorado Springs 1420 Austin Bluffs Parkway, PO Box 7150, Colorado Springs, CO 80933-7150 TM From the Director’s Desk: Reader Feedback By Tom Zwirlein and David Hollenbach In the January 2009 issue of the QUE, Fred Crowley performed a hypothetical input-output analysis where a local government entity used an RFP to select a professional services sector (Implan sector 444) vendor to per- form $1,000,000 of work. The choice was between a business domiciled in El Paso County and a vendor lo- cated outside of the region. Selecting the vendor located inside the county kept all of the funds in the county (no leakage) while selection of the outside vendor “exported” 100 percent of the value of the contract out of the region. The results of the simulation showed that 20 local jobs would be lost, over $925,000 of wages went out of the county, local business profits were reduced by $125,000 and indirect business taxes were re- duced $62,000. In sum, a good deal of economic activity was “exported” to another county or region of the country. These are upper end estimates of the economic loss to a community when business is sourced out of the region. I asked David Hollenbach, Managing Partner of DSoft Technology and Senior Vice President of Veteran Engi- neering and Technology, to comment on Fred’s analysis. DSoft Technology is a locally-owned professional information technology services provider and a Forum partner. Here is what he has to say. “Dr. Fred Crowley’s analysis in the January 2009 QUE, suggested local governments contract- ing with qualified locally-owned businesses, presented a higher value proposition to the tax- payer than the practice of contracting with non-local companies. I couldn’t agree more. The theory is that by contracting with locally-owned firms, opportunities for employment in the re- gion are increased, employing those who buy homes, automobiles, groceries, electronics, etc., and ultimately pay taxes within our community. This in turn increases the tax revenue, giving the taxing authority more resources to use for infrastructure and the public good. Moreover, the profits earned by local firms from these contracts can be plowed back into local banks, churches, the library district, arts, education, charitable organizations, local corporate infrastructure, and also used to create more local area jobs. Anyone who doesn’t know the power of revenue and profit staying local within our community, fails to see the benefits to es- tablished corporate headquarters communities like Cincinnati, Chicago, Redmond, and Austin. When I hear and read the many calls to raise our taxes, to support measures to help our local government, I also know that the local business community would get behind these measures if local government got behind us. Dr. Crowley says that “…for every direct job generated from a million dollars in professional service contracts to local businesses, approximately 1.73 additional jobs would be expected in the local community. None of these would take place if the consulting contract is sent out of the community.” This basic concept has been lost on our local government leaders. Perhaps there’s a feeling that unless we get a firm in from California to assist us with ideas on how to renovate Memorial Park, the ideas we’d get from a local firm are somehow less sophisticated, less sexy. Unless you’ve tried to compete for local contracts, you wouldn’t know there is an unwritten bias against smaller local firms in comparison to the big name agencies in other locales. For instance, the four companies selected for El Paso County’s preferred information technology provider are all headquartered outside El Paso County and some are outside the state. The 14 © Southern Colorado Economic Forum - Quarterly Updates and Estimates - April 2009
    • College of Business and Administration University of Colorado at Colorado Springs 1420 Austin Bluffs Parkway, PO Box 7150, Colorado Springs, CO 80933-7150 TM County’s legal counsel is a law firm from Denver. The web site for the Colorado Springs Air- port was developed by a company in Oregon and the wall space for the airport is sold by a mar- keting firm in Pennsylvania! While I’ll be the first to admit we live in a national and interna- tional economy, I disagree that outsourcing projects out of the area is always a good idea – par- ticularly when top-notch expertise lies right here in our own community. My premise is that citizens want the best value from the tax dollars they pay to the government. Local governments should look for the best value in their procurement system. None of us want poor quality companies doing poor quality work for us, even if they are local! But, local governments can make it easier for good locally based companies to win procurements by re- ducing the paperwork, costs and requirements needed to win projects. An outreach to introduce the government to local business would be an easy first step. Eliminating the duplicative, costly proposal volumes and making it easier for local small businesses to compete for work is an- other. Providing a preference for pre-qualified local businesses is just another option. All this for little to no cost, but large potential benefit to the region. I’ve proposed these ideas to several state and local lawmakers. Some recognize this as a win- win for the local taxpayer, but are powerless to make it happen. Some recognize it as a positive program called ABC (Always Buy Colorado) which helped to benefit Colorado-based busi- nesses in the 1980s and 90s. Others claim that this would create an anti-business climate else- where because Colorado Springs-based firms couldn’t compete in other municipalities as they would enact similar legislation to support their local businesses. I guess they’ve never tried to compete in Denver, Chicago, Texas, or Salt Lake City! Isn’t it time that common sense policies be enacted to support locally-owned companies? Keep taxpayer revenue here and promote new jobs, reinvestment in the community, and a stronger community-business climate. My analysis says that it is in the best interest of the community to use local services whenever possible.” David Hollenbach is a managing partner at DSoft Technology, a Microsoft Certified Gold Partner. DSoft Technology is one of only four Microsoft Certified Gold Partners headquar- tered in Colorado Springs and one of fewer than 50 headquartered in Colorado. DSoft Technology has been supporting federal, state and local government, and commercial and ministry clients in the region for 15+ years. DSoft Technology is headquartered in Colo- rado Springs and uses locally-owned services companies and providers whenever possible. 15 © Southern Colorado Economic Forum - Quarterly Updates and Estimates - April 2009
    • College of Business and Administration University of Colorado at Colorado Springs 1420 Austin Bluffs Parkway, PO Box 7150, Colorado Springs, CO 80933-7150 TM Save the Date Thirteenth Annual Southern Colorado Economic Forum When: October 30, 2009 Where: Antlers Hilton Hotel Format: Town Hall Q&A on the economy Time: 7:00AM to Noon Preliminary Agenda 7:00 Registration 7:30 Opening remarks 7:45 Keynote speaker 8:25 The Colorado Springs economy 9:05 Panelists and Q&A 9:45 Break 10:00 Town Hall Meeting: The Future of Colorado Springs and El Paso County 16 © Southern Colorado Economic Forum - Quarterly Updates and Estimates - April 2009
    • College of Business and Administration University of Colorado at Colorado Springs 1420 Austin Bluffs Parkway, PO Box 7150, Colorado Springs, CO 80933-7150 TM Table 2: Selected Economic Indicators 2008 2008 2008 2009 Vs Year Q2 Q3 Q4 Q1 Ago National Quarterly Data 1.27 1.50 1.89 na 1.14 T tl Loans/Lease Charge-off Rate 3.36 3.72 4.59 na 2.15 Loan Delinquency Rate 106.9 107.5 107.9 na 2.10 Benefit Costs SA 2005=100 107.9 108.6 109.1 na 2.60 Compensation Costs SA 2005=100 1,049 1,021 980 na -92.0 Retail Sales SA (billions) 32.5 31.6 37.1 na -1.9 e-Sales SA (billions) 3.1% 3.1% 3.8% na 0.1% e-Sales as % of Retail Sales SA 2.8% -0.5% -3.8% -6.1% -5.9% GDP Real % Growth (Chained) SA 13.8% 13.9% 13.9% na -0.4% Consumer Debt to Disposable Inc Vs Year Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Ago National Monthly Data 79.2 78.9 78.7 78.6 77.6 74.5 75.4 74.5 72.8 71.3 70.3 69.3 -10.50 Capacity Utilization SA 14.5 14.2 13.6 12.5 13.7 12.5 10.5 10.1 10.3 9.5 9.1 9.8 -5.20 Car & Lt T rk Sales Millions SA 62.6 59.8 56.4 61.2 63.0 70.3 57.6 55.3 60.1 61.2 56.3 57.3 -12.20 Consumer Sentiment (1966=100) SA 214.0 215.0 217.0 218.6 218.6 218.7 216.9 213.3 211.6 212.2 213.0 212.7 -0.45% CPI-U 1982-84=100 SA 2.28% 1.98% 2.00% 2.01% 2.00% 1.81% 0.97% 0.39% 0.16% 0.15% 0.22% 0.18% -2.43% Federal Funds Rate (Effective) 111.0 110.7 110.4 110.4 109.2 104.8 106.2 104.8 102.5 100.3 98.8 97.4 -14.27 Industrial Production (1997=100) SA 1.26 1.26 1.25 1.26 1.29 1.31 1.36 1.42 1.45 1.45 1.43 na 0.16 Inventory/Sales Ratio SA 5.92% 6.04% 6.32% 6.43% 6.48% 6.04% 6.20% 6.09% 5.33% 5.06% 5.13% 5.00% -0.97% 30 Year Convential Mtg Rate NSA 5.24 5.00 5.00 5.00 5.00 5.00 4.56 4.00 3.61 3.25 3.25 3.25 -2.41 Prime Rate (%) NSA 48.60 49.30 49.50 49.50 49.30 43.40 38.70 36.60 32.90 35.60 35.80 36.30 -12.70 Purch Mgr Index SA 177.94 178.46 176.96 174.55 173.38 170.59 166.12 164.95 161.17 163.69 163.54 161.90 -16.03 Real Rtl/Food Svc Sales SA (billions) 1,386 1,400 1,280 1,267 1,283 1,165 969 896 903 826 735 798 -524.83 S&P500 110.6 113.5 113.5 111.4 110.8 109.2 106.4 108.9 104.3 101.3 104.1 na -6.84 T ech Index SA - Mar 2001 = 100 70.5 70.7 71.4 70.9 74.1 75.5 80.4 82.7 80.7 81.0 83.1 83.8 13.52 T rade Weighted Dollar 112.6 125.4 133.9 133.4 116.6 103.9 76.7 57.4 41.0 41.7 39.2 48.0 -$57.58 West T exas Oil Spot Price NSA Vs Year Ago Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Colorado Data - - 208.74 - - - - - 211.07 - - - 2.57% Denver-Boulder CPI SA 149.5 152.1 147.6 169.3 146.5 125.6 99.0 75.1 77.0 62.8 59.8 64.6 -73.6 Kansas City Fed Mfg Index 2,710 2,715 2,752 2,757 2,750 2,746 2,752 2,736 2,732 2,723 2,714 2,706 0.11 Labor Force NSA (000's) 2,725 2,726 2,727 2,727 2,731 2,731 2,732 2,733 2,738 2,740 2,742 2,751 28.46 Labor Force SA (000's) 2,596 2,593 2,614 2,621 2,614 2,614 2,612 2,588 2,567 2,527 2,508 2,493 -85.44 Employment NSA (000's) 2,598 2,598 2,596 2,597 2,597 2,597 2,595 2,593 2,591 2,556 2,535 2,522 -75.25 Employment SA (000's) 4.2% 4.5% 5.0% 4.9% 4.9% 4.8% 5.1% 5.4% 6.0% 7.2% 7.6% 7.9% 3.16% Unemployment Rate NSA 4.7% 4.7% 4.8% 4.9% 4.9% 5.0% 5.3% 5.4% 5.8% 6.6% 7.2% 7.5% 2.90% Unemployment Rate SA Vs Year Ago Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Colorado Springs Data 86.01 87.23 83.14 84.26 80.67 82.93 75.11 71.51 72.01 69.34 68.62 69.48 -16.80 Business Conditions Index SA 84,300 90,195 82,722 79,196 82,052 77,761 83,378 77,289 76,894 76,355 75,914 74,768 -12,342 Co Spgs Airport Boardings SA 409 353 477 397 269 276 429 386 379 393 452 428 10 Foreclosures SA 1,832 1,594 1,775 1,547 1,472 1,565 1,351 1,257 1,335 1,129 1,155 1,157 -487 New Car Sales SA 9,997 9,996 10,835 9,214 10,190 9,740 9,158 9,270 8,987 8,765 8,923 9,636 -590 Sales & Use T ax SA (000's) 135 174 113 145 95 134 83 82 80 85 84 83 -53 Single Family Permits SA 301.4 302.5 305.2 302.9 302.1 301.0 302.3 302.2 300.7 299.3 299.0 297.7 -3.82 Labor Force NSA (000's) 286.3 286.7 287.2 285.2 284.6 284.0 284.3 283.4 279.7 274.8 273.7 272.1 -12.45 Employment NSA (000's) 5.0% 5.2% 5.9% 5.9% 5.8% 5.7% 6.0% 6.2% 7.0% 8.2% 8.4% 8.6% 2.97% Unemployment Rate NSA 5.3% 5.6% 5.6% 5.7% 5.9% 6.0% 6.4% 6.4% 7.0% 7.5% 8.1% 8.3% 2.87% Unemployment Rate SA 17 © Southern Colorado Economic Forum - Quarterly Updates and Estimates - April 2009
    • College of Business and Administration University of Colorado at Colorado Springs 1420 Austin Bluffs Parkway, PO Box 7150, Colorado Springs, CO 80933-7150 TM About the Forum A special thanks to the Forum’s partners for their continuing financial support. The Southern Colorado Economic Forum (SCEF) is part of the College of Business outreach to the Platinum Level Colorado Springs Community. The Forum gathers, Colorado Springs Business Journal analyzes and disseminates information relevant to the First Business Brokers, LTD. The Gazette economic health of the region. Through its efforts, Holland and Hart the Forum has gathered a number of unique data sets. Quality Community Group The Forum and its staff are available for fee-for- University of Colorado at Colorado Springs service work to analyze business situations, develop Wells Fargo forecasts, conduct and analyze surveys and develop solutions to other business problems you may have. Gold Level Examples of prior work include Small Area Forecast Colorado Springs Utilities for the Pikes Peak Area Council of Governments, Fittje Brothers Printing Colorado Springs Airport Passenger Survey, exit LaPlata Communities survey for La-Z-Boy, and a Community Audit for the Pikes Peak Workforce Center. If you would like Silver Level additional information about how the Forum can assist BiggsKofford Certified Public Accountants you, contact Fred Crowley at (719) 255-3531 or e- Colorado Lending Source mail at fcrowley@uccs.edu. Ent Federal Credit Union Strategic Financial Partners The QUE is available free via an electronic Sustaining Level subscription. If you would like a subscription, send Academy Bank an e-mail to fcrowley@uccs.edu and have the word Adams Bank & Trust SUBSCRIBE as the subject. ADD STAFF, Inc. Air Academy Federal Credit Union Previous issues are available at: Antlers Hilton Hotel www.southerncoloradoeconomicforum.com Classic Companies Colorado Springs Credit Union Quarterly Updates and Estimates is a publication of the Ditz Brothers Southern Colorado Economic Forum DSoft Technology University of Colorado at Colorado Springs Executive Programs, University of Colorado College of Business and Administration Griffis Blessing 1420 Austin Bluffs Parkway Legacy Bank P.O. Box 7150 Nunn Construction Colorado Springs, CO 80933-7150 Peoples National Bank Salzman Real Estate Services, LTD College of Business Sierra Commercial Real Estate Venkat Reddy, Ph.D., Dean The Mail Room, Inc. Transit Mix Concrete Company Faculty Director UMB Bank Southern Colorado Economic Forum US Bank Professor of Finance Tom Zwirlein, Ph.D. Forum sponsorship is available at a number of levels and benefits. Contact Tom Zwirlein at (719) 255-3241 Associate Director or tzwirlei@uccs.edu for information. Senior Economist Southern Colorado Economic Forum Fred Crowley, Ph.D. 18 © Southern Colorado Economic Forum - Quarterly Updates and Estimates - April 2009