Colorado homebuilders went into 2020 predicting a big year. Colorado’s job and housing markets were strong. Colorado home sales were up 10% in the beginning of 2020, according to John Covert, a director at Metrostudy. And then came COVID-19. In mid-March most of the country was beginning to head toward lockdown to flatten the curve. And by May, the country was officially in a recession.
Throughout the pandemic Colorado homebuilders continued to operate. The Northern Colorado Home Builders Association worked with the Colorado Association of Home Builders and the National Association of Home Builders to ensure building was designated critical infrastructure. But with layoffs and an economic standstill, sales stalled, and contracts fell through.
Robert Dietz, NAHB’s chief economist encourages Colorado homebuilders to look at the economy in increments of two: two months, two quarters, two years. According to Dietz, Colorado’s economy already made it through the worst two months. He predicts the next two quarters will be a period of rebounding for both the stock and housing markets. The second quarter will probably be the worst economic crisis since WWII. But by the third quarter, Dietz expects positive growth and a really strong rebound.
It will take two years for Colorado to get where it was economically before the virus, predicts Dietz. But he believes the housing market will lead the economic comeback because it started the year so strong. Colorado has seen seven straight weeks of gains for mortgage purchase applications, proving the demand for homes is there, especially single-family homes. The coronavirus hit densely populated areas like New York. This is going to translate into lesser demand for multifamily units like apartments, says Dietz.
According to NAHB, 15% of Colorado residents say they plan to purchase a home within the next year. These homebuyers will most likely be able to take advantage of the historically low interest rates. Dietz predicts interest rates to remain around their current rate for the next two years. But even with low rates, unemployment and the cost of housing are two of the biggest barriers prospective homeowners face.
The U.S. unemployment rate is about 13%, which is both good and bad news. Many economists predicted it to be around 25%, so it stayed lower than expected. Colorado’s homebuilding industry could be part of the answer to bringing people back to work. The industry faces a labor shortage and this is an opportunity to bring people into the industry. However, that will require recruitment and training.
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