Tuesday, May 14, 2013

Student debt load in Colorado

As you might expect, a household's student debt load will impact the availability of funds for rent or mortgage payments. It can also impact credit scores.

The NY Fed recently broke down student debt load info by state.

Perhaps due to the fact that Colorado has a rather high proportion of college-educated residents, and is attractive to recent students from other states, Colorado is well above average for its share of consumers with student debt:

However, when it comes to average student debt per borrower, Colorado is below average:

When it comes to the percent of student loans that are 90-days delinquent, Colorado is about average: 

Here is the report. 

Friday, May 10, 2013

Grand Junction Housing Snapshot, 1st Q 2013

The demand for real estate continues to be soft in Grand Junction. From employment to foreclosures, and from home prices to apartment vacancies, the region appears to be facing some downward pressure on demand right now.

Employment is one of the biggest factors in driving demand for real estate, and we find that Grand Junction continues to face some headwinds. According to the Household Survey, the labor force size in March fell to a six-year low for March. That is, compared to previous years, the month of March in Grand Junction showed the smallest labor force in any March since 2007. This means fewer people are looking for jobs in the area, and this will have an impact on overall household income.

The unemployment rate is calculated using the labor force totals, and we find that the decline in the labor force is helping the unemployment rate move down in Grand Junction in spite of lackluster job growth. The labor force size as of March 2013 was down 7.3 percent, or 6,100 people from the March 2009 peak. We might compare this to metro Denver, where the job force hit an all-time high for March during 2013. We could also compare to the Greeley area where the labor force is near an all-time, after peaking for March (so far) last year. The first graph shows total labor force for each month:

The next graph shows total employment in the area. We can see here that employment growth has been  small, and that total employment is up only about 800 jobs (1.1 percent) from the 2010 trough over the past three years.  

According to this measure, total employment in Grand Junction is down 8.7 percent, or 6,700 jobs from the March peak in 2008 to March 2013. 

The Household survey has its limitations due to small sample size, so I've compared against the Establishment survey of payroll employees to check. The Establishment survey shows that Grand Junction employment in March was down 7.4 percent, or 4,700 jobs from the 2008 March peak.

The next graph shows the payroll employment, and here we find that the year-over-year growth rate in total employment has been declining since January. By contrast, statewide total year-over-year employment growth has been trending upward, with recent growth rates over 2.5 percent. In Grand Junction, growth rates have been below 2 percent in recent years. We could also note that the year-over-year growth in GJ has been smaller in recent years than during the recessionary period of 2002.

The next graph shows the House Price Index for GJ from the Federal Housing and Finance Agency. We can see that (through the end of 2012) the index has basically flatlined since 2011, and is way down from the bubble-like peak levels reached during 2007 and 2008. 

When compared year over year, as I've done in the next graph, we see that growth has been hard to find in the Grand Junction HPI. There has been only one quarter of YOY growth since 2008. I compare that in the graph to the metro Denver HPI which has shown four quarters in a row of growth. Indeed, during the fourth quarter of 2012, the HPI in GJ was down slightly (0.2 percent) from 2011's fourth quarter. 

Another indicator we can note is the index of completed foreclosures.  In the next graph, I've indexed the number of completed foreclosures in Mesa County next to the number of completed foreclosures in all metro counties combined. Here, we see that the combined metro total (the green line) shows a slow and steady decrease in completed foreclosures since 2008, while Mesa County completed foreclosures (the blue line) is way up from 2008 levels.  In fact, in all metros combined, the number of completed foreclosures is down more than 70 percent since 2008 (as of March 2013). In Mesa County, on the other hand, the number of completed foreclosures (as of March 2013) was up 350 percent since 2008, rising from 12 in January 2008 to 54 in March 2013. Compared year over year, the March total for completed foreclosures in Mesa County was down 27 percent, but that's not enough to bring totals down much from the highs at which they presently remain. 

 The next graph shows new housing permit activity in Mesa county. In this case, we find that total permits (both multifam and singlefam combined) at year-end 2012 were at the lowest rate seen since 1991, which is a 21-year low. There was a total of 323 singlfam permits and 12 multifam permits during 2012 in Mesa County. This is the lowest total yet since permits activity started moving down in 2007.

We can compare this to Colorado statewide, in which building permits hit a 5-year high during 2012, growing about 75 percent from 2011 to 2012. This is statewide: 

If we look just as the first three month of this year (in the next graph), compared to the first three months of previous years, we do find a small increase of 25 percent in Mesa County, and a rise to a five-year high. Of course, these totals remain well below even the relatively weak years of 2003 and 2004. If we compare to the same time period statewide, we find that statewide, singlefam permits were up 54 percent, and multifam permits were up 147 percent for the three-month period, when compared to 2012's first three months.

Finally, we look at the vacancy and rent data from the first quarter's vacancy and rent survey. Here we find that the vacancy rate hit 11.8 percent during the first quarter of 2013, rising from 10.4 percent during the first quarter of 2012. It was also way up from the fourth quarter's vacancy rate of 9.7 percent. The next graph shows vacancy rates since 1995: 

The softness in the rental market seems to reflect the overall softness we're finding in the region. As a result of the higher vacancies, rents headed down sharply during the first quarter of year, returning to levels not seen since 2006. We'll likely see the average rent number head back up again somewhat in the second quarter, but we should note that even at the first quarter average rent of $554 in the region (which was down 11.4 percent from last year's first quarter avg rent of $625), the average rent is still above what was common for the region prior to the oil and gas boom. Indeed, in spite of a relatively weak employment situation after 2009, the average rent in the region never fell very much from the elevated post-2006 levels. 

 The final graph shows the average rents in various regions adjusted for inflation. Rents tend to be fairly flat when adjusted for inflation over the long term. As we can see in the graph, however, real rent growth in Grand Junction from 2006 to early 2009 was really quite large, rising 12.3 percent in real terms from the third quarter of 2006 to the third quarter of 2009. Even after the unemployment rate in GJ rose above ten percent for most of 2010, the drop in the average rent was quite moderate. The drop during the first quarter of this year may signal a correction to that. It's too early to tell, however.

Referring back to the home price and foreclosure data, one might argue that the substitution effect should be pushing down vacancies, even in the face of a stagnant employment situation. That is, a lack of demand for purchase housing related to foreclosures and falling prices should be driving people into rental housing as a substitute. This is no doubt a factor, but in some recent regression analyses (discussed in part here), we found that the substitution effect was weak compared to the effects of employment. That is, when employment drove a rise in the demand for multifamily housing, it also drove a rise in the demand for singlefamily housing. So, employment is the dominant factor, and when it's weak, both multifamily and singlefamily experience soft demand. 

Housing News Digest, May 10

Greeley area’s rental market now tightest in the state It’s a good thing help is just around the corner. Greeley’s rental market area has become the tightest in the state, according to numbers released Thursday by the state Division of Housing. The Greeley market’s vacancy rate for the first three months of the year sank to 1.4 percent — from 5.8 percent at the same time the year before — reversing a trend that had for years kept Fort Collins’ market one of the tightest in the states, the state survey reported. New rentals having been constructed in recent months put Fort Collins at a rate of 5.5 percent, …

  Colorado apartment vacancy rate drops for 14th consecutive quarterApartment vacancy rates statewide continue to slide, especially in the northern part of the state, where oil and gas development has driven rents higher and vacancy rates lower, according to a report released Thursday by the Colorado Division of Housing.

  Apartment vacancies rise in Fort Collins-LovelandThe vacancy rate in the Fort Collins-Loveland area rose to 5.1 percent during 2013's first quarter, rising from 2012's first-quarter rate of 3.0 percent, according to the Colorado Division of Housing. In Greeley over the same period, the vacancy rate dropped to 1.4 percent from 5.8 percent.

  Colorado Springs apartments in high demandA strong demand for Colorado Springs apartments pushed the area's multi-family vacancy rate to its lowest level in almost 12 years during the first quarter, a report by the Colorado Division of Housing and the Apartment Association of Southern Colorado shows.

  Report: Springs apartment market strongThe current Colorado Springs apartment market is healthy — maybe the healthiest it has ever been. That’s the conclusion by area experts after reviewing the most recent vacancy and rent survey results from the Colorado Division of Housing. Vacancy, at 5.6 percent, is the lowest locally in more than a decade. But it’s not so low that renters are crunched, said Ryan McMaken, an economist with the division of housing. “Healthy” should not be confused with normal, said Kevin McKenna, a Colorado Springs-based broker with the Denver office of Apartment Realty Advisors. “There’s no such thing as a typical apartment market in Colorado Springs,” McKenna said. “It’s always kind of all over the place.”

Thursday, May 9, 2013

Apartment market tightens statewide as demand stalls in southern and western Colorado

The vacancy rate in Coloradoapartments was down during the first quarter of 2013, with the statewide composite vacancy rate falling year over year to 4.9 percent from 2012’s first-quarter vacancy rate of 5.2 percent. According to a report released todayby the Colorado Division of Housing, the statewide vacancy rate during the first quarter also fell from 2012’s fourth-quarter rate of 5.2 percent. During the first quarter, the vacancy rate was down, year over year, for the fourteenth quarter in a row.

Vacancy rates varied considerably in different metros of the state, however, with northern Colorado and metro Denvershowing some of the state’s lowest rates, while vacancy rates increased in southern Colorado and western Colorado.

The vacancy rate in the Fort Collins-Loveland area rose to 5.1 percent during 2013’s first quarter, rising from 2012’s first-quarter rate of 3.0 percent. In Greeleyover the same period, the vacancy rate dropped to 1.4 percent from 5.8 percent. Colorado Springsalso showed a declining vacancy rate with a first-quarter rate of 5.6 percent, which was the lowest vacancy rate reported in that region since 2001.  The metro Denver vacancy rate, measured last month in a separate survey, fell year over year from 4.9 percent to 4.6 percent

A different trend appeared in southern and western Colorado where vacancy rates increased. In Pueblo, the vacancy rate rose to 14.9 percent during 2013’s first quarter from 2012’s first-quarter rate of 5.9 percent. Over the same period, the vacancy rate in Grand Junction vacancy rate increased from 10.4 percent to 11.8 percent.

“So much of this is driven by employment right now. Vacancy tends to increase with joblessness, and we see this in Grand Junctionand Pueblo” said Ryan McMaken, an economist with the Colorado Division of Housing. “The Pueblo unemployment rate has been over ten percent for more than a year, while the labor force in Grand Junction just hit a six-year low for March, with total employment moving sideways.”

The situation in northern Colorado, McMaken noted, is quite different.

“Oil and gas growth has pushed the vacancy rate down to very low levels in Greeley, while the Ft.Colliins and Loveland areas continue to see low vacancies,” McMaken said. “Rates in Larimer County are only as high as they are because the county has seen a fair amount of new multifamily development in recent years.”

The average rent increased in all metros except Grand Junction from the first quarter of 2012 to the first quarter of 2013. The statewide composite average rent increased 4.1 percent from $952 during 2012’s first quarter to $992 during the first quarter of 2013. The largest increase was found in Colorado Springs where the average rent rose 4.2 percent, year over year. The average rent fell 11.4 percent in Grand Junction, year over year.

Average rents in all metropolitan areas measured for the first quarter of 2013 were Colorado Springs; $787, Ft. Collins/Loveland, $1036; Grand Junction, $554; Greeley, $704; Pueblo, $594. The average rent in metro Denver, measured last month in a separate survey, was $992. 

A vacancy rate of 5 percent or below suggests a tight market. The statewide composite vacancy rate and average rent includes metro Denver.

New Private Activity Bond Workshops

DOLA/Division of Housing (DOH) and the Colorado Housing and Finance Authority (CHFA) are partnering again this year to bring you workshops on Private Activity Bonds. The State of Colorado has over $492 million of Private Activity Bond (PAB) tax-exempt bonding authority annually. Make sure that your community is taking full advantage of this valuable resource to provide rental housing, home ownership and small manufacturing opportunities. Walk out knowing where to get it, what to use it for and how to use it!

We will offer the same workshop content in two locations plus a webinar:
  • Wednesday, June 12 in Colorado Springs
  • Tuesday, June 25 in Brighton
  • Wednesday, July 10 as a webinar
For more details, please see the brochure.

Tuesday, May 7, 2013

CoreLogic: Colorado home price index up 10.4 percent in March

CoreLogic today released its March home price index (HPI) numbers. There were few surprises as the HPI continued to show strong growth of around 10 percent for the third month in a row. National growth and Colorado growth rates were similar. Nationally, the index grew 10.5 percent from March 2012 to March 2013, and it grew 10.4 percent in Colorado. Housing prices continue to increase at some of the largest rates seen since before the financial crisis. 

Nine states had larger growth rates in the HPI than Colorado, with the highest growth rates being in Nevada, California, and Arizona. Nevada's HPI grew 22.2 percent year over year, and California's and Arizona 'a HPIs grew 17.2 percent and 16.8 percent respectively. Only five states showed declines in their HPIs over the same period with the largest declines being in delaware and Alabama where the HPI declined 3.7 percent and 3.1 percent respectively.

Propelled by record-low mortgage rates, home sales continue to head up with home prices following suit.

DSNews: Homeownership Rate Drops to 18-Year Low

As noted in our recent post on homeownership rates, homeownership has been declining in recent years for a variety of reasons. According to DSNews the national rate has fallen off considerably:

The number of households owning homes fell 698,000 to 74,511,000 in the first quarter, the first decline in almost two years, according to a Census Bureau report Tuesday. At the same time, the nation’s homeownership rate fell to 65 percent (seasonally adjusted), the lowest level since the fourth quarter of 1995.
See also: Tight Lending, Foreclosures to Prompt Homeownership Declines:
With the homeownership rate already at its lowest point since 1995, Capital Economics predicts further decline before a rebound occurs.