Lennar, the builder of U.S. Homes houses, is scaling back operations in the Northern Colorado market.

The home builder's 15- employee office in Loveland is closing soon. The office in the Denver metro area will remain open and will staff its existing model homes until sold.

"We've heard we're not the only national builder that is consolidating," said Laurel Followell, customer care coordinator who, along with her co-workers, will be looking for a job.

Home sales during the first quarter this year have slowed nearly 20 percent compared with the same time last year, said real estate agent Dave Pettigrew.

Building permits have slowed locally and nationally, said Dotti Weber, executive officer of the Home Builders Association of Northern Colorado.

It's all part of the real estate cycle, said Eric Nichols, president of the Fort Collins Board of Realtors.

National builders all but evaporated from Northern Colorado in the late 1980s. Then the housing boom that followed the tech boom in the late '90s brought back national builders.

"National production builders have a business model that won't survive without the high-volume demand to keep their machine running," Nichols said.

Several national builders are still operating in Northern Colorado.

"The 1981 cycle was the worst I've seen. This isn't even close; we have work," said local home builder Steve Spanjer, president of Spanjer Homes.

When asked if the Northern Colorado market is overbuilt, Nichols said, "Segments definitely are."

Spanjer agreed that national builders probably have overbuilt their products. Marketwide, the $350,000 to $399,000 home price range has a two-year supply of homes, Spanjer said. There is still a demand for products such as his $250,000 lofts in Old Town and for $800,000 homes in Timnath at the Harmony Golf Club.

Nichols said the swell in the supply of homes on the market might be partly due to landlords who primarily rent to college students who do not want to face the city of Fort Collins' "you plus two" crackdown coming up.

Per city law, no more than three unrelated people are allowed to live in one residence.

"That's why we had asked for two (college housing rotation) cycles, to spread it out a little," Nichols said. "But we were expecting this."

Another major factor is the high rate of foreclosures across the state, also present in other parts of the nation.

Last month, for the second month in a row Colorado posted the nation's highest foreclosure rate, at one filing per 494 houses. This figure represents a 43 percent increase compared with April 2005, according to RealtyTrac, Inc., a national online foreclosure clearinghouse.

In comparison, the national rate of foreclosure increased 33 percent since last year, to a rate of one foreclosure per 1,268 houses.

In Larimer County, 17 percent of the 1,100 homes in foreclosure were new homes, while in Weld County, 16 percent of 1,400 foreclosures were new homes, according to RealtyTrac Inc.

Economists say that because foreclosures are a lagging indicator of the economy, they will get worse before they get better, according to the May 2006 publication, The Group Inc. Real Estate Insider.

Whenever the market slows, overbuilding typically occurs, Nichols said. The market will eventually catch up. But primary job creation must come first - a problem nationwide since companies began off-shoring jobs to economically developing countries in Asia.

This week, The Group Inc.'s monthly newsletter cites inventories of homes available. Supplies for new home buyers range from 16 to 17 months in the Fort Collins-Loveland market to more than three years' supply in Windsor.

"It doesn't surprise me. Residential developments take big money and a major commitment and planning," Nichols said. "You're gambling that when you hit the market, the demand will be there."

If national builders get to the point of selling lots, it might be a good opportunity for smaller, local builders to pick up some lots, Weber said.

Ron Tomasini of Tomasini Construction Inc. agreed. The Fort Collins resident has been building in Cheyenne, Wyo., and works on 10 to 15 homes per year.

"I haven't been building down here because of the bigger builders," Tomasini said. "Maybe now I'll be able to build a few homes here."

Weber expressed concern for builders in the region who might be paying interest on construction loans.

"We're getting back to a normal market. It's hard to sustain a hot market like the one we had for several years there," Weber said.

It's a buyer's market, with prices stabilizing or decreasing 5 percent to 7 percent in some markets where there are few buyers, such as the entry-level market, Nichols said. For example, a condo worth $140,000 in 2003 would probably sell for $131,000 now, he said.

"If we're at the bottom of the bell curve, whether we'll rocket out or wander out, is anyone's guess," Nichols said. "No one knows. I don't care who they are, if they say they know, they're guessing."

Nichols estimated the 5 percent to 6 percent population growth rates in years past have slowed to a 0.5 percent up to 1 percent trickle into the region.

Originally published May 21, 2006
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