September 2007
Metro Denver employment, housing fairing better than nation
Ongoing weakness in the housing market is affecting Metro Denver’s construction, financial services, and other related industry sectors, but unemployment remains historically low. Recent data on home prices and resale also suggests that Colorado may be weathering the housing slump better than many states, according to data compiled by the Metro Denver Economic Development Corporation (Metro Denver EDC) in its Monthly Economic Summary for September 2007.
Eight of Metro Denver’s 11 industry supersectors had year-to-date employment increases. As of July, professional and business services employment was up 4.3% over the same period last year, followed by leisure and hospitality (4.2%), and education and health services (3.2%). The remaining five growth industries had year-to-date job gains ranging from 0.2% in the information sector to 1.8% in government.
Metro Denver’s job count declined by 12,300 jobs between June and July in a typical seasonal fluctuation, reversing a similar job gain between May and June. Still, this latest data from the Colorado Department of Labor and Employment shows that Metro Denver’s job growth through July is up 1.8% over the same period last year. Colorado had a 2% year-to-date increase in jobs, while the nation’s employment increase was 1.5%.
Also fairing better than the nation is Metro Denver’s housing market. According to National Association of Realtors (NAR) data, the national median existing home price was $228,900 in July, down from the record median of $230,200 reached in July 2006. However, the median price of an existing single-family home in the Denver-Aurora MSA increased from first quarter’s revised figure of $239,400 to $255,200 in the second quarter.
In addition, the S&P/Case-Shiller Home Price Indexes marked a second quarter annual decline in the U.S. National Home Price Index and in 15 of the 20 metro-area indexes. The second quarter’s year-over-year decline in the National Index, 3.2%, was the largest in the index’s 20-year history. At the metro level, over-the-year changes in home values ranged from a large decline in Detroit (-11%) to a 7.9% gain in Seattle. Chicago (-0.7%) and Denver (-1%) saw the smallest year-over-year declines of the 20 metros tracked by the index.
Looking forward, industry analysts concede that the near-term direction of the housing market is unclear. Mortgage loans made by unregulated, non-bank institutions cannot be traced, so public records do not provide a complete picture of how far the residential credit crisis could extend. Still, the NAR expects the market to revive later this year and into 2008.
“Colorado’s housing environment is bound to improve further thanks to the 2007 Colorado General Assembly where legislation was passed requiring mortgage brokers in Colorado to be licensed, (including a criminal-background check ) bonded, and insured,” stated Tom Clark, executive vice president of the Metro Denver EDC.
Solid market fundamentals support significant commercial construction activity. In its second quarter 2007 report, CB Richard Ellis reported increasing lease rates, absorption, and construction activity in the Metro Denver office market. On a year-to-date basis, the Metro Denver market had 1.7 million square feet of office space under construction through the end of second quarter, almost twice the amount reported in all four quarters of 2006. In the second quarter, the Downtown submarket had the largest amount of net rentable area under construction. On a year-over-year basis, lease rates were up 10% across Metro Denver and 20% in downtown Denver.
Industrial construction activity has also increased rapidly with 2.9 million square feet of industrial space in the pipeline. Construction activity increased 27% between first and second quarter, and second quarter activity represented an 88% increase over construction activity in second quarter 2006.
Colorado received further recognition this month for health-related achievements. According to a recent report, Colorado has the nation’s lowest rate of adult obesity and the third-lowest rate of childhood obesity. Also, the Children’s Hospital ranked fourth in the U.S. News and World Report’s “America’s Best Children’s Hospitals” survey. Construction on the Children’s Hospital’s new, $400 million Fitzsimons facility is scheduled for completion in October, and work on other state-of-the-art healthcare facilities continues across the Fitzsimons campus.
Recent economic data for Metro Denver reveal that 10 of the 18 indicators moved in a positive direction for the month, the same number of positive changes as last month. On an annual basis, 13 indicators were positive, compared to 14 indicators last month.
The Monthly Economic Summary provides a snapshot of metro area economic activity, as well as its relationship to national and regional economic trends.