For new construction across the region, things may have finally bottomed out last year but the prospects for a booming construction season remain painfully low as high gas prices, even more foreclosures and a tight lending market continue to hamper the industry.
Home construction permits in the U.S. rose 11.2 percent in March after hitting a five-decade low in February, the U.S. Commerce Department said in a report released on Tuesday, but that number is still 13.2 percent below the March 2010 estimate. The same seems to be true for the Western San Juans. Home construction is slightly better than it was a year ago, but not by much.
Within the Town of Ridgway, 2010 saw very little construction as there were only three permits issued for new single-family homes and no permits issued for commercial units. Both of these are drastically down from the boom year of 2005 when there were 75 permits issued for single-family units and eight issued for commercial units. Judging by the inquiries and the number of phone calls the town has recently received, Ridgway Town Manager Jen Coates, who also acts as planning director, is optimistic that the number of permits issued bottomed last year as there are three residential permits for miscellaneous projects on the books this year.
“We haven’t really issued a bunch of permits as of late,” Coates said last week, “but we have had a lot more discussion and a lot more calls. Maybe it’s still a little bit early but judging by the phone calls and the inquiries, things will pick up this summer. I am optimistic this is true.”
Coates, along with others, believe the low rate of new construction is due largely to the continuing high rate of foreclosures. Rather than build a new dream home, people are purchasing homes at drastically lower prices. Mike Sullivan, co-owner of Alpine Mt. Construction, has been building in and around the Telluride region since 1986. He said people are buying houses on the market that cost far less than what it could cost to have someone build them a custom home. As a result, this summer’s construction season, he believes, will be down once again.
“There’s not much out there to bid on right now and when there is, there are four or five or ten people trying to get the job,” Sullivan said. “There’s not much going on.”
Three years ago, Sullivan said he and his partner would be in the midst of three large projects a year; now they are lucky to get one a year and even then the projects are much smaller and inexpensive.
“They are not the dollar value that they were before,” he said. “Everything is smaller and people have a lot lower budget.”
In 2009, the Town of Telluride issued approximately a hundred building permits. That number increased in 2010 to approximately 140. As things look now, according to Town Manager Greg Clifton, construction permits will be about the same this year.
“With respect to building permits, we seem to be holding that course,” Clifton said. “There are no big projects on the horizon but we are seeing a lot of miscellaneous projects coming in and, so far, we seem to be on track with what we did last year.”
In Ouray, building inspector Dennis Moyer had to go back thirty years in Ouray’s building history to find a year that was as slow as 2010. Moyer said that Ouray has had an average of seven to ten residential units issued a year with an average of three to five free standing homes and five or six condos built. In 2010, that total number dropped to two – a number Moyer believes is the bottom.
“Last year we hit rock bottom and already it’s better than last year,” Moyer said. “I think we are on the upswing in Ouray but I still don’t think we are going to hit our average for a couple more years.”
For Ouray County, the outlook for the 2011 is much more grim. County Planner Mark Castrodale’s said that when times were good three years ago, the county had close to thirty building applications active and that county’s building inspection officials were running to keep up with the number of inspections. Last year, there were just over ten permits issued and this year, so far, there are none.
“My gut feeling says that this is not going to be a good year,” Castrodale said. “The general grumbling I am hearing from builders and architects is that things are not good. Things are fairly slow.”
Castrodale said there are so many factors that continue to retard construction growth in Ouray County including the lack of construction loans, financing and, now, high gas prices.
“There are so many factors involved,” he said. “People can’t get financing or they are holding back on spending money and not doing any projects. Personally, I think gas prices are freaking people out. It’s an unknown thing and you don’t know where it’s going to go. It freaks people out. Unfortunately, the common sense thing to do for a lot of people is hold back on spending.
“If gas hits four bucks this summer, I think everything will grind to a halt. The price of food, building materials…everything will go up. People will just stop spending money.”
While gas prices may end up being a factor in this summer’s construction season, Frank Mesaric, the City of Montrose’s chief building official, is hearing, more than anything else, that it’s the lending environment that’s keeping residents from building. In 2007, his office issued 226 permits for single-family residences. That number dropped to 76 in 2008, to 47 in 2009, and then to 31 in 2010.
“It’s not a lack of want out there,” Mesaric said. “It’s the lending environment. People can’t do the projects they want if they can’t get financing. I have had guys come in with a set of plans and then come back a week later and take those plans back because they couldn’t get financing secured. I have had two occasions where a construction loan was going to be less than what the materials cost.”
While the outlook for the entire region may be slightly better than last year, it remains to be seen how painful yet another weak construction season could have on the region’s overall economy.
For Montrose architect Thomas Chamberlain, a return to the time of overly busy construction seasons can’t come soon enough.
“Three years ago, I was swamped. I had to turn work away regularly,” Chamberlain said. “Now it’s pretty quiet out there. For me personally, last year was my slowest year and it’s as quiet now as it was then. This is the season where the phone should be ringing off the hook and it’s not.”