We have been pondering for some time the local economy and how it relates to real estate. When we are driving around town it appears as though there are a lot of new homes being built. I am a golfer and recently played a round at Redlands Mesa and was amazed at all the homes that are being built along the golf course. We have been under the impression that the local economy was not doing very well, but with the number of new homes we see being built we are starting to reconsider. I am curious why there appears to be such a disconnect between the apparent struggling economy and building? Is the local economy doing better than we thought?
Ben and Darla, Grand Junction
Ben and Darla,
Excellent question and not one that I am certain I can fully answer. The dynamics involved are complicated and I am not completely sure I can adequately provide a fully factual answer, but I will do my best!
The Redlands Mesa phenomenon is truly amazing, but not entirely unexpected. Redlands Mesa has undergone a transformation that has seen lot prices decrease from values only available to the wealthy to values that are now attainable to the middle and upper middle class. This has been crucial to the revitalization of that area as there is now some stratification in the pricing structure and opened the door to a much larger buyer pool and this has greatly encouraged building. They have truly done a wonderful job partnering with quality local builders and really opening up the opportunity for people to build an “affordable” dream home nestled up against one of the best golf courses in America.
Forbes Magazine - 2015
Grand Junction At a Glance
- Metro Population: 148,600
- Major Industries: Energy, Agriculture, Tourism
- Gross Metro Product: $6.9 B
- Median Household Income: $47,802
- Median Home Price: $193,700
- Unemployment: 5.1%
- Job Growth (2014): 2.2%
- Cost of Living: 8.9% below nat'l avg
- College Attainment: 27.6%
- Net Migration (2014): 260
- #63 Best Small Places for Business and Careers
- #94 in Cost of Doing Business
- #162 in Job Growth
- #53 in Education
See Full Stats Here
The number of building permits issued in the first quarter of 2016 is virtually the same as the number issued in the first quarter of 2015 and, in my opinion, construction is happening at a healthy pace. To offer some perspective, the building permits issued in the first quarter of 2016 is 78% less than the number of building permits issued in the first quarter of 2007! That is an amazing stat and unless we start to see more lot development the number of building permits will go down over the next several years. In my opinion we are a couple years away from a lot shortage and if that comes to fruition another vital part of our local economy could fall on difficult times. I don’t think there is a disconnect between the number of homes being built and the health of our local economy - actually I believe they are in stride with each other.
I am by no means an economic genius. In fact, I failed Econ 101 my first year in college! However, by my observation, our local economy is just treading water. There are jobs being created, but these jobs are not high paying and these jobs do not provide a ton of upward mobility. When workers move from one job to another, they are largely making lateral moves. The good news is, there are jobs and unemployment numbers are still grinding downward, however, many people are under-employed and not reaching their full earning potential. This kind of job climate helps fuel the home purchases under $300,000 and 83% of our housing market and new construction is happening in the price ranges under $300,000. (Q1 2016) By my estimation, our local economy is not good and it is not bad….it is somewhere in between and honestly, I am thankful it is as good as it is. Until we have more upper end job creation, our local economy will continue to be locked in neutral with some niche segments doing better than others, but overall job and economic growth will remain limited. I hope this makes some sense and remember, it is just one man’s opinion.
By the way, Happy Mother’s Day to all the Mom’s! Moms are the heart of every family and often times the unheralded glue! Take time to call your Mom today and thank her for putting up with you, your siblings and your Dad! Without our Moms, none of us would be here, so we should all be VERY thankful!
The Kimbrough Team