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ARCHIVED  November 1, 1997

Lots of debate over lots

Many lots have been approved, but what˜s for real?
Examining the new-home market in Northern Colorado tends to leave observers with one of two thoughts — either there˜s an oversupply of lots for new homes, or the supply is stable and carefully managed.
Clearly, when discussing Northern Colorado˜s lot supply, each city has nuances affecting its residential market. But in all cases, observers must take into account that there is a distinction between the number of lots that have been approved for residential units vs. the number that actually have infrastructure in place and are permit-ready.
"There˜s a big difference between a lot that˜s approved and a lot that you can build on," said John Giuliano, president of Giuliano & Father Construction Inc. of Fort Collins. "A fair number of approved lots may never get built."
Giuliano, who builds primarily in Loveland and Windsor, said Loveland is a "textbook case" where a number of lots approved years ago may never actually support homes.
And, he believes that in most Northern Colorado cities, there˜s not more than a year˜s supply of developed lots — those for which a building permit is actually ready to be pulled.
It˜s difficult to measure the number of approved lots vs. permit-ready lots simply because planning and building departments do not track that sort of information. Additionally, private-sector real-estate research firms that track such data in the Denver area don˜t yet provide the service in Northern Colorado.
What planning and building departments do record shows the following:
¥ As of Sept. 1, Windsor posted a total of 4,694 single-family and multifamily lots that either have been approved or are in some sort of review or planning process. Of those lots, just 511 building permits have so far been issued. That leaves more than 4,000 potential residential lots in Windsor.
¥ A five-year planning study in Greeley shows that within the next five years, 14,621 housing units could be added. That includes already approved projects, as well as potential residential developments within unplatted zoned areas. That figure is tempered by the fact that the same study projects Greeley˜s population growth during the next five years will be 7,120 people.
n Fort Collins shows that 930 single-family lots and 816 multifamily lots have so far received approval this year. Last year, 1,017 single-family and 665 multifamily units were approved. In 1995, the respective numbers were 836 and 510. In 1994, 2,174 single-family lots were approved, and 863 multifamily units got the nod.
Lot figures for Loveland could not be obtained by press time.
Despite the number of lots the municipalities approve, Giuliano contends that his company, and others similar to it, do not contract for more lots than on which they can build.
"We roll a year˜s supply at a time," he said, which typically is five to six homes a month.
That practice comes from lessons learned in the early- and mid-1980s, when large national home builders, as well as local companies, were left holding residential lots when the market collapsed. They still had to pay interest on the property, and many went out of business as a result.
Now, some of those same national builders are re-entering the Northern Colorado residential market. US Home Corp. of Houston already has been here for about two years. Richmond Homes and Writer Corp., both hailing from Denver, also are poised to begin building here. Writer will build on Lind Land Co. property in Windsor˜s Water Valley, and Richmond has opened an office in Fort Collins.
Industry observers note that the large national builders need to adhere to certain formulas in order to justify building in a new market. In some instances, that may mean they need to build 100 or more homes a year in each area in which they build.
"When there are more big players, it changes the market," said Larry Kendall, chairman of The Group Inc. "It˜s not such a big deal if there˜s just one of them, but if you get three or four like that, it could change things."
Gregory Braun, vice president of finance for Lifestyle Homes Inc. and Clarkson Land of Greeley, figures that the big companies simply will have to do what the market will allow.
"There only are so many people who will buy homes," he said. "If they (the large home builders) can˜t make it work, they˜ go. They˜ve been here before, and they come and go."
"The problem we all have is trying to measure supply and demand," said Loyal Kelsey, head of Kelsey & Associates Real Estate Inc. of Greeley.
Indeed, if all the more than 14,000 approved lots in Greeley are developed and built on during the next five years, "it˜s going to be dicey as hell if you˜re a builder," he said.
"You can˜t sell them unless you build them. Then you build them, and they sit," Kelsey said. "But they˜ve been through it before. Some make it, and some don˜t."
Braun said that at this point in time, he doesn˜t believe there˜s an oversupply of lots in Greeley.
"But there˜s a lot of things that could change," he said. "If there were 14,000 developed lots on the market, it would scare me to death."
Windsor is another area where there is an ample lot supply.
As of Sept. 1, there were 30 subdivisions in various stages of review and approval in Windsor. Together, they represent a total of 4,694 dwelling units, both single-family and multifamily. To date, though, just 511 building permits have been issued for homes in those projects.
"We˜re going to have quite a few (lots)," said Joe Plummer, director of planning for the town of Windsor. "Subdivisions are being approved periodically."
Generally speaking, anywhere from 50 to 100 homes are involved in the first phase of most of the developments.
"There might be an ample supply," Plummer said, "but it all depends on how tied a developer is to getting his price."
Indeed, the more lots that are available in a community could naturally affect lot prices, perhaps driving them down.
Lifestyle Homes˜ Braun has seen an abundance of lots in the price range in which his company builds in Windsor. Lifestyle typically constructs first-time homes and move-ups in the $120,000 to $160,000 range.
However, he noted that many lots in the Windsor area are being purchased by developers in older, established areas that are proven subdivisions and should be easier to sell to prospective homeowners.
Still, Giuliano believes that in Windsor, Loveland and Fort Collins, most developers are working with no more than a year˜s supply of permit-ready lots.
"It˜s a misnomer that we have an oversupply," he said. "It˜s more managed now than ever."
Gus Williams, president of Coldwell Banker Everitt & Williams Real Estate of Fort Collins, agrees.
"In my mind, there˜s not an actual oversupply of developed lots," he said. "When I came to Fort Collins in 1981, they˜d develop 150 lots out in front. Now, developers go out 50 to 60 lots at a time."
Additionally, the implementation of City Plan in Fort Collins clearly has affected how homes will be built in that city. Since it went into effect earlier this year, just one application for a new subdivision has been submitted and currently is going through the review process.
"The developers who have been building here now are pulling out or changing location," Williams said.
However, several projects were approved prior to City Plan, and they still can be built.
In fact, The Group˜s Kendall did a survey earlier this year that estimated there were 2,089 permit-ready lots or lots with homes under construction in Fort Collins.
With approximately 850 building permits expected to be issued this year, that means there˜s a two-year supply of finished lots in the city, Kendall said. However, lot prices have not been falling.
ÔWith the impact of City Plan, does that mean the grandfathered lots are more valuable?" Kendall asked.
As to whether there is an actual oversupply of lots in the city, Bob Blanchard, director of current planning for Fort Collins, noted that it indeed is difficult to know how many lots will be developed.
"We have old projects that may be vested but not built," he said.
For Williams, the long-term outlook is balanced.
"We have a good stock market, good interest rates and a good economy," he said. "But the thing we have to guard against is complacency. If we take those things for granted, then if there˜s a downturn, we won˜t know how to handle it," Williams said.

Many lots have been approved, but what˜s for real?
Examining the new-home market in Northern Colorado tends to leave observers with one of two thoughts — either there˜s an oversupply of lots for new homes, or the supply is stable and carefully managed.
Clearly, when discussing Northern Colorado˜s lot supply, each city has nuances affecting its residential market. But in all cases, observers must take into account that there is a distinction between the number of lots that have been approved for residential units vs. the number that actually have infrastructure in place and are permit-ready.
"There˜s a big difference…

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