Construction starts fell 6 percent in August from July to an annualized pace of 1.67 million, according to a report Tuesday from the federal government.
New-home starts were down 19.8 percent compared to August 2005 and have been declining on an annual basis since April.
But the slowdown doesn’t appear as sharp in Denver, where new home construction has already been slumping for more than 18 months.
“We have seen a little bit of slowing year over year, not to the extent that is being reported nationally,” said Bill Wood, a senior vice president of operations with KB Home in Denver.
What has plagued local builders this year are a huge number of cancellations. Buyers, unable to sell their existing homes, are reneging on their agreements to purchase homes.
About one out of four new single-family-home contracts were canceled in the first half of the year, according to The Genesis Group, based in Englewood.
Some builders are not giving contingency clauses that allow buyers to back out of a contract. Other builders are asking purchasers for appraisals on their current homes to make sure they’re priced to sell.
“We want to make sure we are doing an appraisal on the house they have to sell, and we need to make sure the listing price is close to where it is being appraised,” said Matt Osborn, a senior vice president with Village Homes, a builder based in Englewood.
Local breakouts weren’t included in the Commerce Department’s national housing starts report, but a mid-year review of the metro Denver housing market by Genesis reported that new-home sales fell 11.3 percent in the metro area in the first half of the year, compared with the same period in 2005.
New single-family or detached homes suffered an 18.3 percent decline, and the inventory of new homes available for sale shot up 37 percent.
Lou Barnes, a mortgage banker with Boulder West Financial Services, applauded the news that builders were pulling back.
“Like GM and Ford, they (builders) have to continue to build, even at a loss, to keep the engine going,” he said. A key to any real estate market recovery will be removing the excess supply, he said.
Investors responded to the housing report by selling homebuilders’ shares. Denver homebuilder MDC Holdings fell 1.24 percent Tuesday and is down more than than 38 percent the past year.Shares of D.R. Horton, KB Home and Toll Brothers also were down comparable amounts during the past year.
Mike Rinner, a senior analyst with Englewood-based Genesis, said that falling mortgage rates and lower energy prices would give the housing market a chance to find its balance.
Thirty-year mortgage rates averaged 6.43 percent last week, down from 6.8 percent in late July. The Federal Reserve is expected to hold the line on short-term interest rates at its meeting today.
KB Home is responding to the sluggish market by building more condos and townhomes, which are more affordable, given current interest rates, Wood said.
KB Home also is building high-end houses, a segment that has held up. KB Home also plans to open its first community in Colorado Springs on Saturday.
Staff writer Aldo Svaldi can be reached at 303-954-1410 or asvaldi@denverpost.com.
