The homebuilding market may be slowing down a bit and stabilizing after an exceptional year in 2017, although home prices have continued to rise.
Rising interest rates nationally could be responsible in part for the slowdown, in addition to a lack of developable land within city limits, industry experts said.
Through September, the city of Durango issued building permits for 29 single-family homes and 34 units of multifamily housing, including apartments, duplexes and townhomes.
Last year, the city issued building permits for 56 single-family homes and 299 multifamily units, according to city reports. Rocket Pointe, a complex of about 190 apartments between Walmart and The Home Depot, was approved last year and contributed to the high number of multifamily housing units.
It is unlikely the city will issue more building permits for homes this year than it did last year, said Nicol Killian, assistant director of the Community Development Department.
Homebuilders are facing challenging topography in town, and many of the projects need to be multilevel or require major infrastructure investments, she said. For example, NE Construction had to build a road to serve Rocket Pointe.
“The easy stuff has been done,” she said.
Rising interest rates could be partially responsible for builders requesting fewer permits because they radically change how much Durango residents must earn to purchase a house and that can temper buyer interest, said Roger Zalneraitis, executive director of the La Plata County Economic Development Alliance.
When interest rates rise by a single point, it can increase how much prospective homebuyers must earn annually by $10,000, he said.
“We are really sensitive to small changes,” he said.
While fewer building permits are being issued, high demand and the high cost of land, labor, infrastructure and materials have kept pushing the market price of new homes up, according to builders and real estate agents in Durango.
The median price for an in-town single-family home in Durango was $484,500 during the third quarter of 2018, an 11 percent increase from the $436,500 for the same quarter in 2017, according to Durango Area Association of Realtors data.
Apartment complexes approved by the city of Durango will help meet the need for workforce and Fort Lewis College student housing. But to truly meet the need for housing, the community likely needs two or three more complexes on par with Rocket Pointe, Zalneraitis said.
The city also needs additional speculation homes to meet the need for more attainably priced housing, he said.
However, in many areas, homebuilders are putting in custom homes because homebuyers take on the financial responsibility when they build a custom home and that protects builders from the risk, said Justin Osborn, real estate broker with the Wells Group.
“It’s a no-brainer for them to do customs, as long as the demand is there,” he said of builders.
Some builders are booked out for a year on custom home construction and that could be responsible for a lower number of speculation homes being built, he said.
Three Springs, an area known for speculation homes and attainable prices, has not been immune to rising home prices.
In the last 12 months, there have been about 48 sales in the subdivision, and the median price for those homes was $395,750, said Max Hutcheson, a real estate broker with the Wells Group. During the 12 months from November 2016 to November 2017, there were 67 home sales in Three Springs, and the median price for those homes was $345,000, he said.
The rising prices have been driven in part by a dwindling number of smaller, less-expensive lots in the subdivision and a high cost of materials, he said.
Hutcheson doesn’t expect home prices in Durango to fall under $300,000 unless a major recession takes place, he said.
Timberline Group, a Three Springs builder, has noticed buyer interest slowing as fewer people attended open houses and fewer sales closed this summer, which is likely a reflection of the market slowing nationally, company president Emil Wanatka said.
Low interest rates were one of the main factors in buyers’ favor in recent years, and now that they are rising, it is rippling across the country, he said.
“I think there is a lot of hesitancy,” he said.