Construction industry continues slowdown, looks to 2009

Click to Enlarge A construction worker frames a new building Wednesday afternoon at 5300 29th St. in Greeley. New construction has slowed considerably in northern Colorado in the past two years. RIZA FALK / rfalk@greeleytribune.com Browse Our Galleries

Sharon Dunn, (Bio) sdunn@greeleytribune.com
November 15, 2007

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Northern Colorado already is almost two years into a housing slump, and the list of casualties keeps growing.

Home construction loans are down 48 percent at one local bank. Building permits for remodels and new construction in the region also are down about 50 percent. Sales taxes for Greeley building permits are down about half.

"This downturn is by far the worst I've seen in ... 43 years," said Jim Pask, northern Colorado Market Manager for BMC West, a lumberyard in Greeley. BMC closed its roofing truss company more than a year ago.

The latest construction loss comes with the apparent closure of Structural Components Systems, 2401 2nd Ave., which came to Greeley in spring 2002 offering 125 jobs and a boon to the job market. By the time it was listed for sale three weeks ago for $3.77 million, the Nebraska-based company was down to 61 employees in Greeley.

At present, voice mail to the Greeley offices still operates, but plant managers aren't returning phone calls, even from their Lakewood offices.

The writing has been on the wall for some time, and many companies have been scaling back in the slowdown.

The feverish pace of home building since 2000 created an oversupply on the market in recent years. That market, however, couldn't sustain after three years of record numbers of bankruptcies and foreclosures and layoffs. The most recent crash of the sub-prime market put the brakes on a lot of home lending, making loans for first-time buyers hard to come by.

The shakedown has reverberated through the industry.

Pask said BMC West has 60 percent fewer employees now than it did almost two years ago.

"We closed our truss company in June 2006, long before we got the pain in this go-round," Pask said. "We transferred our people to Fort Lupton where we have a larger plant. We saw the curtailing of the business back then."

Summer 2006 seemed to make the downturn more of a reality when Lennar, a national home builder, left the northern Colorado market.

That's also when the city of Greeley started seeing the building permit numbers plummet. Numbers continue to slide.

"Most everyone pulled their projects in and saw the writing on the wall," said Tim Swanson, chief building official for Greeley. "Most of the home builders have just not been throwing them in the ground the way they were. ... We issued 14 single-family dwelling permits in October. We projected that we'd do 175 for the year and we're still on track. But, in 2005, we did 750."

KB Homes, another national home builder, hasn't pulled a permit in northern Colorado in quite some time, said Dotti Weber, executive director for the Homebuilders Association of Northern Colorado.

"People are downsizing a bit, trying to weather the storm," she said. "A lot of local builders have been through these ups and downs before and are probably a little better prepared than a new company."

Still, she said, membership to the organization is down to 425, 21 percent fewer than the year before, which would include some businesses merging.

Lifestyle Homes owner Dave Clarkson said his staff is down about half the size it was two years ago.

"It's been difficult, but we're moving through it," Clarkson said.

Bankers are feeling the pain, as well.

"Up here, construction is a big deal," said Larry Wood, president of Union Colony Bank in Greeley, where construction loans are down 48 percent.

"Construction lending is something that rolls fairly rapidly," Wood explained. "Every six months a house is built and paid off. Then you do another one, and you collect loan fees. So that churn helps the income. And the churn isn't there anymore."

The proverbial storm may be a long one. Industry officials initially looked toward 2008 to be the turn-around year, but now all thoughts are moving to 2009.

By then, Vestas Blades will have built its Windsor plant and hired its 400-plus employees, Swift will have settled into its second shift with an extra 1,300 employees, and presumably, the inventory of vacant homes will start decreasing.

"(Next year) is going to be a tougher year," Wood added. "But I do think it could be a good absorption year, not necessarily bring in a lot of profit, but with the opening of new business and hiring people that will absorb that excess inventory, by 2009, we'll start building houses again."

Mark Bradley of Realtec, a northern Colorado commercial real estate firm, said he's already seeing interest in the SCS building on 2nd Avenue.

"We have a truss company that's talking to us about it, and a couple of other manufacturing companies talking to us," Bradley said, adding that it could take from six to nine months to get the building sold. "The good news is that industrial vacancies are low, but we do have some big companies out there looking for space. It's likely that whoever buys them will be bringing new primary jobs into the economy."

Building permits issued in Greeley

Number Value

2007* 1,685 $65.6 million

2006 1,945 $102.3 million

Year-to-date single family home permits

2007 131 $21.7 million

2006 255 $41.5 million

(Numbers are based on year-to-date permits issued through Sept. 30)

Source: City of Greeley