1 week Ago By By Rich Laden [email protected]
Colorado Springs-area home construction rebounded in 2024 from the previous year, though one local builder labeled last year's activity as just so-so, while uncertainty about mortgage rates and Trump administration policies on tariffs and immigration could pose challenges for the industry in 2025. Building permits issued for the construction of single-family, detached homes mostly in the Springs and surrounding El Paso County totaled 2,463 last year, a 9% increase over 2,259 permits issued in 2023, according to the Pikes Peak Regional Building Department, the joint city-county agency that oversees residential and commercial construction in the area. Those numbers on building permits, which are one measure of the health of the local housing market, don't include townhomes, duplexes or condominiums.
Despite the year-over-year increase in single-family permits, "we looked at 2024 as just an OK year," said Tom Hennessy, president and CEO of Colorado Springs-based Challenger Homes. Some homebuilders who expected falling mortgage rates pulled permits — especially in the first half of 2024 — in anticipation that lower borrowing costs would boost the housing market, Hennessy said. That trend somewhat skewed permit numbers and didn't necessarily reflect an overall stronger housing market, he said.
At the same time, the increase in permits led to home construction that inflated builders' standing inventory or their supply of finished, but unsold, homes, Hennessy said. Those new homes then had to compete with existing houses, whose inventory increased throughout the year, according to Pikes Peak Association of Realtors figures. "To me, it equates to an OK year," Hennessy said of the year-end building permit totals.
"Nothing great. I think we all had hopes for a better year and it just didn't pan out. Interest rates remained stubbornly high.
" In fact, 30-year, fixed rate mortgages rose steadily during the fourth quarter of 2024, and on Thursday averaged a six-month high of 6.91% nationally, according to mortgage buyer Freddie Mac. Long-term rates had dropped as low as 6.
08% at the end of September, Freddie Mac figures show. Challenger, like other builders, continues to offer mortgage buydown programs to offset higher rates. As part of such programs, builders help reduce, or buy down, a mortgage rate for a loan's first few years to help buyers afford monthly payments and get into a new home.
"Buyers were kind of in and out of the market," Hennessy added about 2024. "There were times when the interest rate got down to 6% and then there were times where it was darn near close to 8% all over the course of 2024. It was a schizophrenic market that had some buyers worried.
" Nevertheless, Challenger Homes, as one builder, enjoyed a good year, Hennessy said. The company completed sales of more than 400 homes in 2024, which was above the number it had budgeted for the year, he said. "We felt really good about that, what we achieved," Hennessy said.
"But it would have been nice to do a little bit more." At the same time, even as builders had more standing inventory at year's end, Colorado Springs' housing market hasn't been overbuilt and builders have been cautious not to overextend their finances by purchasing too many home sites that might sit idle. Looking ahead to 2025, builders such as Challenger believe the incoming Trump administration could lead to a stronger business climate and national economy, which could help strengthen the homebuilding industry, Hennessy said.
It's unknown, however, whether tariffs discussed by incoming President Donald Trump could hike the cost of building materials and result in higher housing costs, he said. Meanwhile, tighter immigration controls could curtail the labor supply for homebuilders, which also could increase construction costs, Hennessy said. Mortgage rates also remain a question mark for the housing market and homebuilding industry, he said.
If long-term rates fall back to around 6% and help propel the Colorado Springs housing market, "I see a pretty good year," Hennessy said. "There's a lot of pent-up demand, there's a lot of people who've been holding off moving, (who) if they had a better interest rate environment, will move," he said. "We're budgeting more of the same and pretty similar to 2024, but, again, hoping for better.
If signs turn upward, you'll see us start to pull more building permits in the second quarter, third quarter.".
