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!

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Fred Crowley\'s Quarterly Report

  1. 1. 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
  2. 2. 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
  3. 3. 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
  4. 4. 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
  5. 5. 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
  6. 6. 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
  7. 7. 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
  8. 8. 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
  9. 9. 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

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