It seems like a ton of new construction neighborhoods have been sprouting up and growing across the valley over the last year—which we think is a great thing! What’s next for 2019? Will the new construction market continue to grow? And what areas of the valley will we see more new neighborhoods pop up?
Thank you as always for your insight!
Johnny, Grand Junction
Great question and I completely agree…new home building and new subdivisions are a great thing and a welcome sight for our local economy. New home building and new subdivisions bring excitement, good financial growth for our local businesses and just an overall positive vibe that helps set the tone for many other sectors of our local economy! Moving forward I believe we will continue to see good things on the horizon, but there are a couple of potential storm clouds that require monitoring!
Seems like each and every year (at least since 2012) we have seen steady home building growth and almost all of the building growth from 2012-2015 was by home builders purchasing and building on existing lots that were left over from the last recession. When we entered the last recession there were literally hundreds of lots that were un-built and those lots largely sat empty until we started to recover in 2012. Inexpensive foreclosures drove market prices down and created an environment that made building very difficult and not very profitable. However, once the foreclosures were in the rear view mirror, our builders started dipping their toes back into the new home business and eating through the existing lot inventory. During the recession lot prices dropped significantly and were very affordable, which was an added bonus to jump starting new home construction. Once that inventory stated to dwindle down (2015ish) many realized that there would soon be a need for new lot inventory.
With the realization that our existing lot inventory would soon run thin, many builders and local developers started the process of creating new subdivisions and new lots. Some big, some small, but those yellow signs started popping up all over signaling the start of the next wave of growth in the Grand Valley that continues today.
Overall residential building growth was up 20% in 2018 for a grand total of 802 residential single family building permits pulled by our local builders! Again, this is incredible news for our local economy. For some historical perspective there were over 1,200 permits pulled in 2008 at the height of the last boom. To go along with residential construction, commercial permits held their own and remained neutral in 2018 with a total of 48 commercial (47 in 2017), but the value of these permits was up nearly 30%, so the project numbers were the same but the project sizes were substantially larger! Again, nothing but good news and I expect the good news to continue into 2019!
There are many more subdivisions on the horizon from Fruita to Palisade and all points in between, so 2019 should again provide plenty of new subdivisions and homes to look at. I believe new home construction will remain strong and we may not see another 20% gain, but we should easily see an additional 10% and with that we should continue to see good commercial growth that typically follows in a more supportive role to residential growth. Even with all of the good news and positive outlook there are always reasons to keep a watchful eye.
Interest rate increases are the low hanging fruit here, but for me the rising building costs and a slowing national economy are the two kind of under the radar things that I am keeping an eye on. Building costs are soaring and this could start to put significant pressure on affordability. A slowing national economy creates issues as it may become harder to sell in other markets as demand and prices begin to shift downward! If you sell for less when you sell, you logistically have less to spend when you buy. Again, I do not believe these are immediate threats, but worth keeping a watchful eye. Hope this helps and onward and upward in 2019!
The Kimbrough Team