National Economy
Applications for mortgages dropped to the lowest level in 4 years and home purchases dropped for the third straight week. The increase in rates has also drastically slowed the refinancing which was helping drive the consumer spending. Estimates are that refinancing is down 40% from this time last year (Denver Post, August 3, 2006)
According to a recent article (Daily Camera, p 16a, August 5, 2006), unemployment nationally rose to a 5 month high (4.8%) in June. One result of this was the Fed deciding to fore go another rate hike at the last meeting even though the core inflation rate is the highest in 11 years (Denver Post, August 3, 2006)
Energy prices continue to dominate the consumer market. Not only at the pump but also in the stock markets. Almost any negative news coming from a oil producing area is causing jumps in the price at the pump and drops in the stock market.
Regional Economy
The following is a summary of the Boulder County economic indicators compiled by Dr. Richard Wobekind (Boulder County Business Report, July 7-20, 2006).
The overall indicators are up although the growth is sluggish at best. According to Dr. Wobekind the indications are that the local economy is directly tied to the national economy. As many analysts project the national economy is to be slower for the rest of the year the local economies should also show the same trends. Although the growth in the GDP has slowed many analysts expect growth in the GDP to still be in the 3% range.
Jobs will drive growth. The local unemployment rate is projected to remain 0.5 to 1% below the state average of 4.9%. Colorado is still projected to be slightly below the national rate of 5%. Obviously, more jobs\employment will result in growth for the state. Boulder county growth is still projected to be slightly slower that the rest of the metro area.
The biggest indicator of business investment in Colorado is the Business Leaders Confidence Index. Although this is down to 54.2 from the 60.1 of the 2nd quarter, a number above 50 is still regarded as positive. The only category that was below the 50 mark was local expectations of the national economy.
Overall the Leading Economic Index for Boulder County is up 1.9% over the first quarter 2005 and up 0.4% from last quarter.
In Broomfield county the employment was up 0.6% from fourth quarter. This is an increase of about 2% from 1QTR 2005. Unemployment for the quarter was up about 6.2% than last quarter but is still down 6.9% from the first quarter 2005 level.
Also in the BCBR was an article (David Clucas, p 34A, July 7-20, 2006) that shows almost 46,000 jobs are directly tied to real estate in Colorado. This is almost 11% of the total jobs. Mr. Clucas shows this is “...a double-edged sword...” such that if the real estate market slows so will a large chuck of the local economy. The article quotes Ken Hotard, the senior VP of the Boulder Area Realtor Association, as stating “Northern Colorado is really poised as an area for growth.”
Homebuilders are holding off buying land while the market for new homes remains soft and a record number of homes are on the resale market (Denver Post, July 12, 2006). Although permits are up, about 1/3 will be for multi-family projects close to the light rail corridors and in-fill area. The commercial and industrial segments are showing strong growth so far this year.
