As the Federal Reserve continues to prop up the national economy, Teller County is slowly climbing out of the economic hole left by the Great Recession. In a presentation March 20 at the Ute Pass Cultural Center, representatives of the local economic sector offered cautious optimism for 2013.
The market is recovering losses of nearly 30 percent, said Sharon Roshek, broker/owner with Coldwell Banker 1st Choice Realty. As well, prices for vacant land today are nearly back to where they were before the crash, she said.
The recession was ugly on market dynamics. The number of units sold in the county dropped from 259 in 2007 to 180 in 2008-2011, Roshek said. “It doesn't look like a lot on the graph but it's a whole lot in dollars,” she said.
The area's commercial market is still in flux. “The income-producing commercial properties are actually beginning to pay for themselves; they were so out-of-whack in this gluttonous society that we were always banking on the come,” Roshek said. “The numbers just didn't work. Unfortunately, a lot of those owners had to let properties go back to the bank.”
In Woodland Park, the demand for rental housing is high due to the number of foreclosures during the recession. “You almost have to know somebody to get a rental,” she said. With the opening of Charis Bible College in the fall, the demand for rentals will increase, she added.
Irene Tanis, broker with Remax Performance, Inc., talked about a market in revival mode. Of 113 homes for sale in Woodland Park, 24 are under contract, she said. “We're not seeing as many foreclosures or short sales,” Tanis said.
In 2008, homes under $300,000 stayed on the market at least 180 days, she said, while homes over $300,000 took two years to sell. “Homes are starting to sell faster, some in two weeks to a month,” she said. “We have competition from Colorado Springs but there are a lot of people wanting to come to our area.”
In southern Teller County, with the economic infusion from the Cripple Creek & Victor Gold Mining Co. and the gaming industry, the housing market is stopped only by the lack of inventory, said Carrie Miller, broker/owner of Gold County Realty.
With 50 to 60 homes sales a year, sale prices range from $475,000 to $15,000. “There's a huge demographic spread in our market area,” she said. “The demand remains strong but maybe that's because there are fewer Realtors on the market.”
There's not much movement in the commercial market, Miller said. “We have an owner who owns a lot of properties that remain vacant,” she said. “You do need to be realistic when you're going to rent something.”
Miller's clients include baby boomers and, recently, families, many of whom work for Ames Construction, general contractors for the mine expansion. With the influx of foreclosures in the area, investors are paying cash for the depressed properties, Miller said. “The second-home market is strong because we're a vacation area. Today's buyers are looking for smaller homes.”
In the building-materials industry, the crash has left significant destruction. “Nationwide, 50 percent of businesses selling building materials in 2005 are out,” said Jim Olsen, general manager of Foxworth-Galbraith in Woodland Park and president of Teller County's Homebuilders Association. “Our company is affected as well; we went from 79 locations to 24.”
Today's construction industry faces numerous stumbling blocks that include financing and labor shortages, Olsen said. As well, compliance costs attached to the regulations set by OSHA, the Environmental Protection Agency and the local building department add to the cost of doing business, he added.
If financing and regulations weren't enough, the industry is hampered by the run on lumber and commodity prices, Olsen said. A sheet of plywood, for instance, has jumped from $7.95 to $17.64. “The increase can partially be explained because we're exporting lumber from places like China and, with the increase in housing, lumber mills are at capacity,” he said. “Mills have lost money for so long they have no desire to hire people.”
Olsen pleaded for shoppers to boost the local economy. “There are struggling businesses out there; we as a community need to figure out how to keep our money here,” he said. “That also goes for the building industry.”
By the end of the year, mortgage interest rates will be up to 4 percent or higher, said Luke Conrad, loan officer with Benchmark Mortgage. Conrad is skeptical about new regulations on the industry that include a mandate to separate lenders and appraisers. As well, the Dodd/Frank legislation strengthens the requirement for loan applicants while requiring lenders to reduce risk by holding the loan amount on their balance sheets, Conrad said.
Today's banks will probably loan only 80 percent of the price of a home, said Dale Schnitker, vice president of Vectra Bank. In the past the bank would loan 90 percent to its prime customers. “It was hard to define who those customers were as values just went into the ground,” he said.
On commercial property, buildings in Teller County once valued at $2 million in 2008-2009 are now valued at $1 million, Schnitker said. “Even at that, what kind of widget do you sell out of that building to be able to pay for it?”
Vectra's goal is to hold just 1 percent of distressed and foreclosed properties in its portfolio. “We don't make any money holding these properties,” he said.
Down the road, Park State Bank & Trust is lending, said the bank's president Tony Perry. With Dodd/Frank, there is concern that legislators over-reacted, Perry said. As well, there has been talk in the industry about the possibility that lenders could be held liable for loan defaults. “If that happens, that would definitely slow things down,” he said.
On commercial property, the bank is lending at low interest rates, thus, there are opportunities, Perry said. “My perception is that investors are tired of sitting on the sidelines,” he said. “You are seeing it in our community, investors buying buildings.”
Over the past five years, Park State was lending 75 percent of the total loan. “We thought we were safe, but we weren't, so we've been digging out of that,” he said. “For consumers, I think it's important to look at your balance sheet, understand the risks. I think, with downsizing, a lot of people with means are asking `why take the risk?'”
The city of Cripple Creek relies on sales taxes and gaming for its revenue. “Most people don't realize this, but the last year Cripple Creek gaming industry had positive growth was 2004,” said Mayor Bruce Brown.
As well, the city faces another hurdle, with the revival of Gilpin County's renewed attempt to change the distribution of gaming revenue from 80 percent to 90 percent. “If that happens, we'd take about a $1 million hit a year” Brown said.
In Victor, there is a renaissance going on, said city administrator Debra Downs. “We have an influx of new people and there's a lot of remodeling going on,” she said. “The Cripple Creek & Victor Gold Mining Co. is a huge positive impact on our community.”
The mine drives the housing market, particularly now with its expansion and the influx of labor through Ames Construction. “We are investing in our downtown, have done drainage and curb-and-gutter projects. We've paved a couple of streets.”
With its business-incentive policy, the city waives fees for sewer and water taps. The first waiver was awarded to a laundry mat. “Come up to Victor and wash your clothes,” she said.
On another economic infusion, the city received a $350,000 grant from Great Outdoors Colorado for a new hockey rink.
Because the downtown is a National Historic District, the city struggles to attract investors in the old buildings, due to the rigorous regulations regarding remodeling. “As well, new construction has to fit in with the other buildings,” she said. “Another issue we have is that many of the buildings are owned by out-of-towners.”
When it comes to sales-tax revenue, Woodland Park is humming along. “From 2003 to 2012, the city had increase of $1.5 million in sales taxes,” said Brian Fleer, executive director of the office of economic and downtown development. “Our city has a 17-percent fund-balance for operating reserve and we stay within those parameters.”
While revenue from residential property taxes is expected to decrease, the decline will be slight, he said.
As an economic indicator, the city approved applications for four commercial water taps, said Sally Riley, the city's planning director. In comparison, she said. For comparison, in 1997 the city approved 120 water taps for commercial buildings.
This year, the city is experiencing a resurgence of building. In addition to Woodland Hardware, Wommack Ministries is proceeding with plans for two large structures, a 900,000 square-foot banquet hall and a 217,000 square-foot main structure.
In the construction hopper are the Trail Ridge Apartments with 168 units and seven buildings. “We get constant calls from people wanting to invest in our community,” Riley said.
Unemployment remains relatively high in the region. In Woodland Park, the rate is 7.5 percent while it's 8.5 percent in Teller County. Yet Teller County has four major employers, the RE-2 School District, Wommack's, the Pikes Peak Regional Hospital and Sturman Industries. “Keep in mind that 50 percent of our workforce commutes,” Fleer said.
In a place where affordable housing remains elusive, Fleer announced that he is working with two developer entities which are pursuing tax-credit financing for two affordable-housing projects. One is at Colorado 67 and Valley View Drive, the other are the Ute Chief trailer park.
Until private investment replaces federal economic stimulus, the nation's recovery will continue to lag, said Brad Spivey, chief investment officer with Park State Bank & Trust, who introduced the forum. “Depending on your political persuasion and your economic interpretation, that is good or bad. The good part is that the stock market and the housing market are starting to recover.”
On the national scene, Spivey predicted a 2 percent growth rate in the GDP in 2013.
Spivey based his presentation on a rainbows-and-clouds theme.