Homebuilding on the rebound in Grand
July 6, 2015
With home prices booming along the Front Range and the housing market thinning, the real estate market in Grand County is showing strong signs of growth.
"There are several factors involved here," said Brad Smith, President of Terra Firma Custom Homes Inc. "We have been in a down slump for quite a few years and I think that is finally coming to an end. The Denver market is on fire. I think there is some pent up demand. Grand County has a really nice set of characteristics. We are under priced compared to Summit, Routt or Eagle County. "
Terra Firma is a full service custom home construction firm that also does light commercial construction. They typically work on higher end homes ranging from the $700,000 to multi-million dollar mansions, and while they work throughout Grand County many of their projects are visible from Highway 40 in the Rendezvous subdivision. Terra Firma was established in 1996. Smith has been building homes in Grand County since 1999.
Smith explained that Terra Firma's project volume has increased two-fold over the last few years. The firm has also seen a corresponding increase in the number of employees.
“All indications I have are that this return of the building economy has legs, that it is going to be long term. We are half booked for next year already.”Brad SmithPresident of Terra Firma Custom Homes Inc.
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That increase is laid out in building permit data from the county. Building permits in Grand County are issued by the Grand County Building Department and the Town of Winter Park's Building Department. The Grand County Building Department issues building permits for unincorporated Grand County, the Town of Grand Lake, the Town of Hot Sulphur Springs and the Town of Kremmling. The Winter Park Building Department issues permits for the Town of Winter Park, the Town of Fraser and the Town of Granby.
So far in 2015 the Winter Park Building Department has issued 13 new SFD building permits. They issued a total of 23 new single family dwelling (SFD) building permits in all of 2013, and 50 in 2014.
The information for 2015 provided by the department covers permits issued year-to-date, and with the summer construction season gearing up that figure is likely to rise over the coming months. Thus far in 2015 one SFD permit has been issued for Winter Park, 10 have been issued for Fraser and two have been issued for Granby. The Winter Park Building Department has also issued new building permits for one duplex in Winter Park, three triplexes and one new commercial building in Fraser, and a 19-unit condo in Granby.
So far in 2015 the Grand County Building Department has issued a total of 224 permits with 24 new SFDs. They issued a total of 510 building permits in 2013, covering all new construction as well as renovations and remodels. This included 50 new SFD building permits. The County numbers were up slightly in 2014 with the department issuing a total of 568 permits including 56 for new SFDs.
The 2015 figures from the County Building Department included 41 permits for the Town of Grand Lake including two new home permits and five permits for the Town of Kremmling with one new home permit for that community.
Smith of Terra Firma noted several trends in home construction in Grand County he has seen recently, highlighting a movement toward mountain-modern style architecture as compared to the mountain-rustic style that was more popular before the recession began.
"We are also seeing the use of more sophisticated building products, specifically in regards to thermal insulation," Smith said.
Smith explained the movement to more mountain-modern style architecture is also in keeping with an ongoing trend towards smaller homes, providing more manageable and intimate spaces.
"All indications I have are that this return of the building economy has legs, that it is going to be long term," Smith said. "We are half booked for next year already."
Smith explained he believed both an increase in interest rates and ongoing global events could possibly put the brakes on the rebound, but he was optimistic about the overall outlook. Terra Firma is currently working on about half a dozen projects, which Smith compared to the company's prerecession volume.
Smith also discussed the possibility of developers moving into the region to begin building speculation developments.
"We don't participate in it but I think you are about to see developers start building spec projects again," Smith said. "Sale prices are going up and inventory levels are not very deep. That is a pretty good indication."
Lindsey Morrow, Executive Director of the Grand County Builders Association echoed Smith sentiments.
"We had a huge downturn in 2009," said Morrow. "We are slowly starting to build back up."
Morrow said she has noticed three trends in construction in Grand County recently: more high-end new construction, an increase in additions and remodels, and a movement toward "green" upgrades on homes.
The high-end home construction that is ramping back up in the county is broader in scope than before, explained Morrow.
"The average is about $250,000 to $360,000 for mid-grade new construction homes," Morrow explained, though she highlighted that some of the upper tier construction is reaching into the multi-million dollar scale.
The movement to "green" or environmental and energy efficient home upgrades is also taking off as homeowners and those looking to purchase new homes have more money to designate specifically for repair work.
"We are seeing everything from small water saver toilets to spray foam insulation to solar panels. We are doing more 'green' building," she said.
May of 2015 had the largest number of new SFD and multi-family dwelling (MFD) building permits issued in a single month over the last five years. According to Morrow a total of 38 SFD and MFD building permits were issued for all of Grand County in May. The Grand County Builders Association has also seen a corresponding increase in their membership numbers. The association currently has 46 members and has seen a 20 percent membership increase in the last 18 months.
One unique aspect of the real estate and home construction revitalization that is occurring now is the increase in buyers paying with cash as opposed to taking out loans.
"I think in general there is greater demand," said Frank DeLay, president of Grand Mountain Bank. "But it is still slower than it was five or six years ago. The underwriting requirements are a little bit harder than they were pre-recession when terms were easier. Right now rates are still about as low as they have ever been."
DeLay explained that lenders expect interest rates to slowly creep up over the foreseeable future.
DeLay also discussed home prices in the region.
"From what we see residential home prices have stabilized and maybe even increased a little bit, though nothing like Denver. Land costs are very low here in comparison to where we were a few years back."
DeLay noted the number of home sales in Grand County has increased over the last several years, though lenders like Grand Mountain Bank haven't seen an exact corresponding rise in lending.
"There are a lot more cash buyers right now that don't need loans. More so than in the past."
He explained that anyone looking to take out a home loan would still need to raise the standard 20 percent down payment.
Twenty percent is usually a safe bet. There are still programs out there were you can put less down, but 20 percent is still about the right spot."
With the real estate market in the mountains on the rebound new construction is beginning to appear throughout the county. Prospective homebuyers and investors still have an opportunity to take advantage of relatively low prices in the region, as demand from the Front Range swiftly moves into the High Country.