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format version of this newsletter. The Vectra Bank Small Business Index fell sharply in October, as a declining unemployment rate reflected a shortage of workers. Economic conditions, according to the Index, are the same as they were in the base year of 1997. Colorado Springs economist David Bamberger reported that four of the city’s monthly indicators declined, while four rose in October. In this analysis, a declining unemployment rate is a positive indicator. The CU Leeds School of Business economic forecast for Colorado, released December 4, projects job growth of 1.9% or 42,300 jobs, slight above our forecast of 1.4% or 32,000 jobs. One third of the growth will occur in professional and business services. The manufacturing sector will lose jobs for the seventh consecutive year. U.S. Small Business Administration loans fell 28.3% in fiscal 2006 in El Paso County, the second consecutive declines. Loan volume last year reached a 5-year low. Statewide, SBA loans increased 6.9% to record 2,612 loans totaling $556 million. Nationally, SBA loans rose 5.5%. Five small research and development oil shale leases were authorized in western Colorado, the first in 20 years. In 1982, Exxon closed a multibillion-dollar oil shale project in Garfield County, idling 2,200 workers. An estimated 1.8 trillion barrels of oil may be trapped in the Green River formation of Colorado, Utah and Wyoming, enough to meet 25% of U.S. demand for 400 years. Payday lenders made $494.3 million in payday loans in Colorado in 2005 at an average annual rate of 345%, according to the state attorney general. The number of licensed lenders increased 14%. The average payday loan is $300. The volume of payday lending rose 34% in 2005 and was more than double the amount loaned in 2002. Coloradans gave $3.35 billion in charitable contributions in 2004, an average of $1,873 per household, according to the Center on Wealth and Philanthropy at Boston College. This was out of an average before-tax income of $72,794 and after-tax income of $56,662. Coloradans ranks near the middle in terms of giving out of income – 28th as a share of gross income and 29th as a share of after-tax income These data contrast with the Catalogue of Philanthropy’s Generosity Index, which ranks Colorado 42nd. In 2003, Colorado had the highest percentage of students in the nation with SAT scores above 1,200 and ACTs above 26. We were ranked 2nd in the percentage of the population with a college degree, but only 16th in high school diplomas. Our graduation rate of 70.6% was 29th and we ranked very low in engineering tech and engineering graduates per 1,000 available jobs, according to the Business Research Division at CU Boulder. The state ranked 33rd in total support for higher education and 48th in per capita support. We were 32nd in support for K-12 education and 47th per $1,000 of personal income. We did a bit better on preschool education, ranking 22nd in spending per student. Apparently Coloradans spend their money rather than donating it or using it to support education. Retail sales rose 9.4% through August, according to the Colorado Department of Revenue. Colorado is the nation’s 16th healthiest state, according to the United Health Foundation. Coloradans ranks well in obesity, child immunization and smoking, but poorly in prenatal care, number of uninsured and state spending on health care. Colorado ranks among the top states for mortgage frauds, according to Fortune Magazine. Utah and Arizona are other Mountain Region states with high losses. Centennial is Colorado’s safest city, ranking 52nd out of 371 nationally, while the City and County of Denver is the most dangerous, ranking 303rd. Fort Collins is 139th and Colorado Springs is 173rd.
Employment: Job growth through October averaged 2.1%, with the unemployment rate remaining steady at 4.4%. Over the past 12 months, all sectors of the state’s economy except Information have added jobs. The Colorado Springs Economic Development Corporation reported that it assisted in recruiting 2,086 primary jobs in 2006. This more than replaces 1,183 layoffs at ten local companies. Job Changes 2006
The National Federation of Independent Businesses’ chief economist Bill Dunkelberg reports that small business owners say the availability of qualified workers is their biggest problem. Except for the boom of the 1990s, this percentage is at a record level. Manpower Inc. reports that 40% of Denver employers plan to increase hiring in the first quarter of 2007, while only 13% plan a decrease. Statewide, 33% plan increases and 15% plan decreases. In Colorado Springs, only 10% plan increases, while 38% plan decreases. Colorado ranked second in the nation in high technology companies as a percentage of total companies (2002 data), with 8.7%. These companies provided 173,000 jobs and accounted for 17.6% of gross state product. There are 75 companies with 300-400 employees working with nanotechnology. The median size is 14.5 employees. Data were collected by the University of Colorado Business Research Division. Cost of Living : Denver had the highest cost of living among Colorado cities, according to the Council for Community and Economic Research, while Pueblo had the lowest.
ACCRA COST-OF-LIVING INDEX (3rd Quarter 2006)
The cost of health care in the state increased 8.5% this year, to an average of $7,952 per worker. Nationally, the increase was 6.1% to $7,523, according to the Mercer Health and Benefits Survey. Since 2000, health care costs in Colorado have increased 82.2%, while wages and salaries have gone up only 15%. One cost of living factor that is often ignored is time spent commuting. For the first time, in 2004 Americans spent a higher percentage of their income on transportation than on housing, according to a story in the Colorado Springs Gazette. Residents of Park County, part of metropolitan Denver, have the ninth longest commute in the nation at 82 minutes each day. Colorado had one of the highest increases in households reporting food insecurity, according to the U.S. Department of Agriculture. From 2003-05, there was a 2.8% increase in Colorado, third only to Maine and South Carolina with 3.3% and 3.2% respectively. Neighboring New Mexico saw a 2.5% increase, while Montana experienced a 1.6% decline. On a lighter note, PNC Financial Services reports that the cost of the 12 days of Christmas rose 3.5% last year to $75,122. Lords a-leaping, ladies dancing and pipers piping all demanded higher wages. Purchasing the items online would cost $125,767 when shipping costs are included, up 1.6%. Partridge prices were unchanged.
Population: By 2030, Colorado will have almost as high a percentage of residents age 65 and older as Florida, our oldest state, does today, according to state demographers. In 2003 Colorado was one of the youngest states, ranked 47th with 9.7%. By 2030, that is expected to rise to 16.4%. Florida today is 16.7% elderly. Over this period, Colorado’s population is expected to increase to 7.3 million people, from 4.5 million today. In Colorado, 11.9% of residents are civilian veterans, defined as people over 18 who have served in the military but are not currently serving. Nationally, the figure is 10.9%. Colorado Springs has by far the highest ratio, 19.0%, followed by Grand Junction, with 15.7%. Colorado’s K-12 student enrollment increased 1.7% in the 2005-06 school year, according to data released by the Department of Education. Growth was concentrated in about half of the state’s 178 school districts, The last of the 4,000 soldiers in the 3rd Heavy Brigade Combat Team returned to Fort Carson from Iraq in November. They are scheduled to return to Iraq next fall. More than 2,000 members of the 4th Infantry Division will arrive in 2007, although most of the division will remain in Texas until they complete a tour in Iraq in 2008. Eventually, 10,000 troops will move to Fort Carson, bringing the number of soldiers stationed there to 25,000. $1.2 billion in construction work is underway to accommodate the influx. About 400 housing units are being built on base.
Tourism: Passenger traffic at Denver International Airport rose 10.5% through October. This was the 18th month of record activity. A daily nonstop flight between DIA and Munich, Germany, will begin in March. Denver now has international flights to nine destinations in Mexico and six in Canada, in addition to London and Frankfurt. International traffic increased 17.4% year-to-date. The statewide hotel occupancy rate averaged 61.7% in October, up from 58% a year ago, according to the Rocky Mountain Lodging Report. Year-to-date, occupancy rates are running 2.3 percentage points ahead of 2005. The average room rate has increased 8.3% to $113.26 relative to the first ten months of 2005. The Cumbres & Toltec Scenic Railroad reported a 21.7% increase in passenger traffic over the summer tourist season. Almost 40,000 passengers traveled between Antonito, Colorado and Chama, New Mexico in 2006. Gambling revenues in October fell slightly relative to September to $64.8 million. $8.8 million in gaming taxes were paid. Adjusted gross proceeds were 1.2% ahead of October 2005.
Housing: Housing permits fell 12.6% through October, with single-family permits down 19.6%. Multifamily permits are soaring, up 35%, despite problems developing in the multifamily market. The Urban Land Institute’s Colorado real estate luncheon discussed overbuilding in the Denver condo market, with many units sitting vacant and several large projects on the drawing board. Existing single-family home sales in metro Denver fell 8.0% in November and are down 3.6% year-to-date. Condo/townhouse sales declined 10.9% for the month and 4.3% through November. Single-family inventory is 10.5% above a year ago. The median sale price was down for the month and for the year in the multifamily market. The median single-family price fell 3.3% for the month but was up 1.2% for the year. Sales of new homes in the metro area fell 9.5% through September, according to the Genesis Group. The Colorado Home Price Index rose at a 3.72% annual rate in the third quarter, according to the Office of Federal Housing Enterprise Oversight. Nationally, the index rose 3.45%. This measure looks at the sale of the same houses over time and is not influence by the size or mix of homes sold as other home price measures are. Homes in rural areas appreciated more than in metropolitan areas – 41.5% versus 20.5% in Colorado over the last five years.
Home Price Appreciation
Grand Junction had the most rapid price appreciation in the state, ranking 51st with 13.35%. The most rapid appreciation was in Bend, Oregon, with 30.37%. Greeley had the fifth slowest annualized increase in housing prices last quarter, down 1.99%. Prices have more than doubled in the last five years in Florida, Hawaii, Maryland, the District of Columbia, California and Nevada. A lot of attention has been paid to the level of foreclosures across the state, with speculation that 2006 will break the record set in 1988. What is forgotten in most of the stories is that the number of households and the housing stock is far larger than it was 18 years ago, when the population was only 68% of the 2006 estimate of 4.79 million. Recently the Metro Denver Economic Development Corporation examined the foreclosure rate adjusted for the increased housing stock and found that Denver is on course to see 1.7% of all homes in foreclosure by year-end. This is below the 2.1% recorded in 1988 but well above the 1.3% posted in 2005. RealtyTrac reported that Colorado had the highest foreclosure rate in the country for the second consecutive quarter, with one new foreclosure filing for every 363 households in the third quarter. This was almost three times the national average of one listing for every 127 homes. Foreclosure activity in the state increased 24% in the third quarter, above the national increase of 17%. Fourth quarter foreclosure data were slightly better. In November, Colorado slipped to second place behind Nevada, with one foreclosure filing for every 362 households. This was up 88% from November 2005. Metro Denver apartment vacancy rates averaged 6.7% in the third quarter, down from 6.9% in the second quarter and 7.7% a year ago. The average rent continued to increase, to $865.76, up 2.3% from the third quarter of 2005. The economic vacancy rate, which includes concessions, was 23.1%. The vacancy rate for metro Denver housing with 1-4 units was 6.4%, down from 7.1% in the second quarter and 9.2% a year ago. The average rent was $957.28, up 4.9% over the year. Colorado Springs reported an increased vacancy rate of 11.3%, up from 10.3% both three months ago and a year ago. Never-the-less, rental rates increased 1.2% over the year, to $695.36. Statewide, the vacancy rate decreased to 7.2% in September compared to 7.7% in February and 8.6% in September 2005. All vacancy data were compiled by Dr. Gordon Von Stroh at the University of Denver.
Statewide Apartment Vacancy Survey
Colorado Springs vacancy rates averaged 11.3%, up a full percentage point from the previous quarter, as 3,600 soldiers in Fort Carson’s 2nd Brigade Combat Team deployed to Iraq. Vacancies near Fort Carson soared to 36.3%, from under 8% a year ago. Rates should fall in the fourth quarter following the return of almost 4,000 troops from the 3rd Heavy Brigade Combat Team. The average rent of $695.36 was 1.6% higher than a year ago, but below the high of $703.10 posted in the first quarter. About 68% of metro Denver rental units that are affordable to those earning 30% of the median income, or $21,290, are located in Denver and Arapahoe counties. There are no affordable rentals for this income group in Douglas County, according to a BBC Research study. Colorado Springs has 66 homes on the market for $1 million or more, according to The Patterson Real Estate Group. In 2006, 40 homes have sold in this price range, about the same as in all of 2005. Nonresidential: The Grubb & Ellis third quarter commercial real estate market report points out an interesting anomaly in the Denver office market. Despite vacancy rates well above 10%, the neutral level at which it is neither a landlord’s nor a tenant’s market, rental rates are soaring. Their explanation is the high prices that have been paid for Denver property in the last 24 months, when a record number of office buildings were sold. An abundance of capital across the nation has been looking for good commercial real estate investment opportunities and paying top dollar for them. Landlords are raising lease rates to justify the prices paid and so far the expanding energy, defense and service sectors have been willing to pay up. Frederick Ross Research reported an office vacancy rate 18.1% in the third quarter, with all of the occupancy losses that resulted from 9/11 and the technology bust of 2001 recovered. The retail vacancy rate continued to hover at 5.0% and the industrial vacancy rate declined to 7.8%.
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