Americans are buying RVs, boats and personal aircraft at an unprecedented clip, data shows. Racehorse purchases have ticked up to prerecession levels.
Those are a few unconventional signs of the country’s booming economy and strong consumer confidence, economist Elliot Eisenberg shared at the Denver Metro Association of Realtors 2018 economic summit Thursday.
One problem is sucking the wind from the country’s economic sales, Eisenberg said, and it’s one the Denver area is all too familiar with: A chronic shortage of for-sale housing, particularly the affordable kind.
“We built 850,000 single-family homes last year,” the economist said during his presentation. “That’s a recessionary low level. This is nuts.”
According to Eisenberg, homebuilders came up about 300,000 homes short of the national need in 2017. He expects new construction to fall 250,000 rooftops short of need in 2018, compounding a national shortage already of more than 4 million houses.
Statistics he shared from the National Association of Realtors showed that national housing inventory has fallen for 30 consecutive months, declining 6.4 percent in 2017.
In a conundrum that certainly resonates in Colorado, home prices are outpacing wage increases 2-to-1. When developers do build single-family homes, they’re building higher-end products to maximize profit in the face of rising regulations and labor costs.
“You can build million-dollar homes. It’s good for the economy, but it’s not as good as building five $200,000 homes, because folks can’t get in,” Eisenberg said.
Eisenberg provided the macro view of a problem the Denver metro area has been experiencing in micro for years.
“Inventory is one of our biggest concerns we have going today,” Steve Danyliw, chairman of the association of Realtors’ market trends committee, said Thursday, pointing to a year-end stock of 3,854 properties on the market, the lowest level since record-keeping began in 1985. “Pretty much for the last four years, we have been in a substantial deficit in terms of inventory.”
Danyliw, owner/broker with Littleton-based Danyliw & Associates, highlighted association statistics that showed that if no new single-family homes were added to the market in January, the metro area would sell out of housing stock by the first week of February. The problem is worse for cheaper properties. The stock of homes selling for $200,000 to $300,000 would sell out in around 10 days.
Analysts say it’s no bubble in Denver either. Credit is hard to come by and job growth is strong even if wages aren’t keeping up, data shows. A major drag on the ability to meet the demand — nationally and locally — is a worker shortage in the construction industry. A recent survey of industry professionals shows 56 percent of Colorado firms in the construction industry view finding enough workers as their biggest concern in 2018.
Despite the grim outlook for meeting demand, Danyliw did highlight one positive trend for would-be homebuyers: Median home prices in metro Denver — while at an all-time high of more than $434,000 and rising — grew more slowly last year than in 2015 or 2016. After rising by 13.3 percent in January 2015, the pace of price growth dropped to 8.3 percent in December 2017, with signs it will continue to drop to more sustainable levels this year.
“This is not necessarily saying that there is a bubble that is about to burst, but what it does say is the rapid rate is growth is starting to slow,” he said.
