Wednesday, February 24, 2016

Latest Case-Shiller Home Price Index: Denver metro home price index up 10.2 percent

During December 2015, home price growth in the Denver area, according to the Case-Shiller index, remained at some of the highest levels seen in a decade, with year-over-year growth at 10.2 percent. That's down from November's year-over-year rate of 10.8 percent, but up slightly from December 2014's rate of 10.1 percent.

The first graph shows the year-over-year comparisons for the past decade:

We can see that growth is topping what it was during the nationwide housing bubble that existed prior to 2008. Clearly, for-sale housing demand remains rather robust in the region (at least as of December).

Compared to the 20-city composite index for home prices, Denver continues to see even greater growth. In fact, metro Denve rgrowth has been almost double the 20-city composite growth in recent months:

As noted here, as of December 2015, employment growth in Metro Denver has been slowing, but apparently not enough to bring down the sizable growth rates we've been seeing in home prices in recent years. Global and national economic trends do show reasons for concern about slowing economic growth, and we do see slowing employment growth stateside, but it seems we'll need current trends to persist longer before we see significant changes in for-sale housing demand in these numbers.

Military spending by state: Colorado ranked 18th

With the arrival of the presidential primaries (and especially the one in South Carolina), i'm reminded that military spending can be a major factor in state level politics. Some states owe very large portions of their state's GDP to military spending, and it's not a coincidence that Southern states are known for their pro-military voting blocs. Many states in that regions have economies intimately tied to their local economies.

To see where Colorado fits in this, we can look at a 2011 study conducted by Bloomberg that examines military spending by state. The key factor we'll look at here is the amount of  military spending in each state, compared to the overall GDP.

When mapped out, it looks like this:

This statistics is not to be confused with total military spending. California, for example, receives much more military spending, overall, than Colorado does, but proportional to their overall economy, military spending in California is smaller in California than it is in Colorado. 

In Colorado, military spending is equal to 4.3 percent of the state's total GDP. We could compare that to a top-ten state like Virginia where military spending is equal to 13.9 percent of the state's economy. In South Carolina, the percentage is 5.7 percent. 

The state least dependent on military spending is Minnesota where the percentage is 1.1 percent. 

As a region, the Rocky Mountain Region outside Arizona is not largely dependent on military spending, with both Wyoming and Idaho in the bottom ten:

All in all, Colorado ranks in the middle at number 18. The amount of military spending the the state if fairly large for a state of our size and population, but thanks to a highly productive work force and lots of non-military federal spending, the overall comparative size of military spending in the state does not put us near the top of the list.

Colorado Springs permits hit four-year low

During December 2015, single-family permits in Colorado Springs were tied with January 2015 for the lowest level of permits reported since December 2011. There were 124 single-family permits reported during December 2015, which was the same amount reported during January 2015.

The first graph shows single-family permits, by month, over the past fifteen years:

During 2015, permits peaked during the summer, as usual, with 311 permits reported during July 2015.

For December, though, if we compare to other Decembers, in order to take seasonal factors into account, we find that December 2015 was the least active December in four years:

December's numbers are not enough to suggest a downward trend in themselves, although the trend since 2012 has rather clearly been a flat one, with little movement up or down.

Nevertheless, sedated permit activity may be reflecting lackluster job growth that has been a factor in the local economy.

Multifamily Permits 

But what about multifamily permits? Multifamily activity is so sporadic from month to month, it's difficult to see much from monthly data, but with the end of 2015, we now have annual data for 2015. Looking at the year as a whole, we find that 2015's multifamily-family permit total was the lowest recorded since 2012, and is thus at a four-year low:

2015's multifamily development appears to come from a single project.

Not surprisingly, we also see that the average rent in Colorado Springs has been heading upward in recent quarters as little growth in new supply leads to a squeeze on existing housing supply. A lack of solid growth in single-family construction will contribute to this as well.

There are no dramatic trends to identify here, although it does not appear that the Colorado Springs economy is something we would call "robust." For now, the housing economy in the region shows signs of holding steady, although continued declines in job growth growth will lead to declines for housing demand in the region.

(All permit data is from the US Dept. of Commerce.)