Colorado Springs Builders Trying to Offset Stagnant Sales

One Colorado home builder is offering landscaping, a sprinkler system and special financing to woo buyers. Another is telephoning previous customers in hopes of attracting buyers. Several builders have joined forces in a first-ever marketing blitz to promote a couple of hundred unsold homes.

According to the Colorado Springs Gazette, even as area builders look for ways to spur sales, a report Wednesday provided fresh evidence that housing demand has slowed dramatically in comparison to the past few years.

While Colorado mortgage lenders dispute the extent of the housing crisis, there’s no arguing with the fact that the number of single-family home-building permits issued in El Paso County plunged 45.5 percent to 188 in October compared with the same month last year. Before October’s 188, the lowest was 244, in December ‘01.

So far this year, single-family permits total 3,145, a 31.6 percent falloff compared with the same period last year. At that rate, this year’s permit total won’t reach 4,000 — making 2006 the first year since 1997 in which permits will fall short of that mark. That’s as clear a sign of a housing market in decline as there will be.

Despite the problems seen by Colorado Springs, the housing slowdown is more pronounced in other cities, such as Denver, where prices have started to drop and new home construction has slowed even more.

Still, the Colorado Springs housing slide has the potential to whack the economy like a two-by-four upside the head. The home building industry employs thousands, and some builders have already laid off employees.

Colorado Springs and other local governments rely on sales taxes from the purchase of lumber, tools and other building materials as a major revenue generator. Revenue from building materials sales is up 2.4 percent so far this year, said Mike Anderson, Colorado Springs’ assistant city manager.

But many purchases of lumber and other materials come several months after the permits are pulled. As a result, the city might not yet have felt the full effect of a slowdown in home construction. So far this year, the total value of permits for new single-family homes, townhomes and other construction has fallen by nearly $165 million.

Todays Homes had deals in place last year to construct 124 properties, said company marketing director Victoria Stone. The company had expected to top that figure this year but now probably will only match it.

“We’re behind projections,” Stone conceded.

Todays Homes typically launches fourth-quarter promotions to boost year-end sales, but it’s being even more aggressive because of market conditions. As a result, buyers who purchase an existing home will get full landscaping and a sprinkler system.

In addition, buyers will get $3,000 for closing costs, and can choose to skip monthly payments for six months or shave 1 percentage point off a 30-year, fixed-rate Colorado home loan through Todays Homes’ lender. Currently, a 6.25 percent mortgage would be cut to 5.25 percent.

On a $175,000 home, the package is worth about $18,000. Depending on how long buyers are in their homes, the home loan rate reduction could mean more savings.

But is anyone left to buy? Low mortgage rates the past few years have made homebuying affordable for people who had been renting, drying up some of this year’s pool of buyers. Now a lot of economists are left worrying not whether the market will decline, but how hard and how fast.