Optional buying slows Steamboat housing market recovery
May 12, 2012
Steamboat Springs — In a sign of the times, Tom Fox received 52 applications when his company, Fox Construction, ran a classified newspaper ad this spring seeking to hire a project manager and estimator.
Fox counts his contracting business among the fortunate ones that are launching new projects this year. Among others, he's tackling the new Holy Name Catholic Church on Oak Street. As a result, he's looking to hire 20 to 25 employees in what is otherwise a very flat construction market, particularly for single-family homes.
The response to his help wanted ad tells him that building professionals who have weathered the storm this far are the survivors and eager for work.
Fox was speaking to an audience at the Steamboat Springs Chamber Resort Association's Business Outlook Breakfast at Rex's American Grill & Bar on Wednesday. He wondered aloud why anyone would buy a building lot and begin the process of building a new home in this market unless they had a very specific need, had already looked at everything in the market and couldn't find what they wanted.
"One of my neighbors sold their house for $1.1 million less than what it cost," Fox said. "That does not help our industry, but it's part of the process."
That process, said David Baldinger Jr., of Steamboat Village Brokers, is all about gradually working through the properties already listed for sale and arriving at a healthier ratio of homes for sale to homes being sold. But getting there is more complicated than it is in Denver, he said.
"This is a resort, and it's not a supply-and-demand market" like Colorado's Front Range, Baldinger said. "A lot of selling and buying is optional. We always have a larger inventory that we're going to sell."
Baldinger predicted the local market would recover gradually for years to come and would come back differently in different neighborhoods and different classes of real estate.
During the height of the market in 2006 and 2007, the Steamboat market generated enough volume to sell one of every five or six properties in any six-month period. At that time there were about 1,200 properties listed for sale. Now, there are 2,000 listings and the pace of sales is more like one in 15.
"That's really stretched out the timeline in every category," Baldinger said. "People perceive the market as being worse than it is, and they're frustrated. But there just aren't as many buyers as sellers."
The rate of recovery of the real estate market and its ability to absorb existing inventory has much to do with the construction industry, Baldinger and Fox agreed.
Even as construction has slumped, Fox said, the cost of building a new home has gone up, and it's not due to the wages construction workers are earning or the gross margins contractors are taking. Instead, the cost of building materials has gone up, much of that attributable to the rising cost of petroleum needed to manufacture and deliver materials to job sites. Gypsum wallboard alone has gone up 30 percent in recent years, Fox said. Some of that can likely be attributed to manufacturers charging more simply to allow them to keep manufacturing facilities operational.
Baldinger told his audience that with real estate prices here down 30 to 35 percent, 70 percent of Routt County's real estate market now comprises properties selling for less than $500,000, and 50 percent of sales are for properties below $300,000.
Not coincidentally, Fox, working within a separate business entity from his construction company, is working very deliberately on bringing a new subdivision through the city planning process with the intent of being prepared to deliver homes on small lots for less than $500,00 when employment and construction in Steamboat finally recovers.
The proposed Sunlight development would include 92 lots on 44 acres within the city limits and north of the existing Indian Trail subdivision.
To reach Tom Ross, call 970-871-4205 or email tross@SteamboatToday.com