Tight market and low inventory are key to Glenwood Ridge case
August 6, 2014
Glenwood Ridge annexation City Council hearing dates
• Thursday, Aug. 7, 7 p.m. (part of regular council agenda)
• Tuesday, Aug. 12 (time to be announced)
• Tuesday, Aug. 19 (TBA)
All hearings held at Glenwood Springs City Hall, 101 W. Eighth St.
As Glenwood Springs City Council prepares to hear the latest plans to annex 506 acres of ranchland south of town for a new 413-home development, a key question has been whether the local real estate market is ready to absorb that many new houses over the next two decades.
Public hearings for the Glenwood Ridge project, proposed by Elk Meadows Properties and involving the former Bershenyi and Martino ranches located approximately 1.5 miles up Four Mile Road, resume at 7 p.m. Thursday at City Hall.
Council has scheduled two additional special meetings on consecutive Tuesdays, Aug. 12 and 19, to continue its consideration of the proposal and move toward a decision by month's end.
In June, the Glenwood Planning & Zoning Commission followed city staff's lead and recommended denial of the annexation and development request.
“I believe, in fact I know, that what we are proposing meets the housing needs of Glenwood Springs, both in terms of pricing and housing type.”
The main reason is uncertainty about how the development would pay for such things as street maintenance and improvements, plus new demands on utilities, police, fire and other services in a large, somewhat remote new residential neighborhood.
However, Glenwood Springs does have a latent demand for both homes for sale in the middle price range and for rental housing that could meet the needs of the local workforce.
Glenwood Ridge proposes to add a total of 413 new housing units to the city's inventory over the next 20 years, including 225 single-family units, 98 townhouse units, 12 duplex units and 78 condominiums. The new homes are proposed to be built in several phases in three connected neighborhoods situated on either side of Four Mile Road.
The project would also include a 16.7-acre ballfield complex to be operated and maintained as a city park. Another 1,140 acres that is not part of the annexation request is proposed to be dedicated to the city or possibly Colorado Parks and Wildlife as open space or for limited development of hiking and mountain biking trails.
"I believe, in fact I know, that what we are proposing meets the housing needs of Glenwood Springs, both in terms of pricing and housing type," project representative Gary Menzel said in an interview before the P&Z vote.
Depending on market conditions when the new homes are built, he said he anticipates a price range of between $225,000 for the smaller units and $600,000 for the larger ones.
A housing study the city had done in 2005 suggested that Glenwood Springs would need to add about 2,885 additional residential units by 2015 in order to keep up with the incredible demand occurring at that time.
That was before the Great Recession of 2008 and the resulting downturn in the real estate market and tighter lending.
Even before the downturn, though, Glenwood Springs lagged behind other communities in Garfield County in adding residential construction to the mix.
From 2004 through 2013, a total 2,700 new homes were built in the county as a whole, from Carbondale to Parachute, according to a fiscal impact and market assessment done for the city by RPI Consulting in response to the Glenwood Ridge proposal.
However, only 271 of those new homes, just 10 percent, have been in Glenwood Springs, which is still the most-populous municipality in the county at about 9,500 people, although Rifle isn't far behind.
In fact, between 1980 and 2012, Rifle saw the largest population growth in the county, picking up 6,000 residents and driven mostly by the natural gas boom.
Carbondale, New Castle and Silt also picked up a greater percentage of the overall county population during the last two decades, according to the RPI report.
Over the last five years, only 94 new residential units have been built in Glenwood. Two-thirds of those involved the 60-unit Glenwood Green income-restricted rental project that was completed at Glenwood Meadows last summer.
The last major residential subdivisions to be built in the city, Cardiff Glen, Sopris Station, Park West and Park East, all on the south end of town, are now 95 percent built out, the Glenwood Ridge application points out.
"There are virtually no lower- to middle-class building sites left in Glenwood Springs," the project's proponents state. "Glenwood Ridge will serve [a] middle-class market, which is currently underserved."
Garfield County has a current inventory of 2,153 vacant residential lots, including 520 within 5 miles of Glenwood Springs that would be competing against Glenwood Ridge if it is approved, the RPI report also points out.
"This only includes development that is currently platted," the report states, noting that an unknown number of approved subdivisions have not been platted and may or may not ever be developed.
"It is clear from this analysis that the inventory of vacant lots is extensive and there is no doubt that these are challenging conditions for new developments," the report concludes.
However, only 106 such vacant lots are within Glenwood Springs' city limits, according to the consultant's research.
"A majority of these are dispersed infill lots," the report states. "There are no subdivisions that have a significant number of remaining vacant lots."
Most of those lots are not even available, considering an average of just three vacant lots are sold within the city in an average year. Many of the city's vacant lots may not even be developable due to various geologic and legal constraints, the report also suggests.
Other key findings in the city consultant's report include:
• New-built home sales in Glenwood Springs over the last 10 years peaked at 77 in 2006, before dropping to 21 when the recession hit and reaching a low of just 11 sales last year.
• The average new home price in Glenwood since 2006 peaked at $446,500 in 2008 before falling to a low of $265,558 in 2012 and rebounding to $347,215 last year.
• Since 2009, new home sales in the city have not been a substantial component of total sales, accounting for just 6 percent of total residential sales, down from 31 percent in 2006.
Market trends up
From a market perspective, the timing could be about right for what would be the first major land annexation and housing development since city voters rejected the 149-lot Red Feather Ridge project in 2003.
A large-lot, higher-end subdivision was ultimately approved on that site by Garfield County. It's situated just down Four Mile Road from the proposed Glenwood Ridge location, but remains in the unincorporated part of the county.
In fact, the idea of essentially leap-frogging an established rural-density development for a higher-density, urban-type neighborhood has been another of the major objections to the Glenwood Ridge project.
Recent trends in the local real estate market suggest things are gradually picking back up on the sales front, especially as the backlog of distressed and foreclosed properties that resulted from the recession moves off the market.
As of December 2013, the absorption rate for houses on the market between Aspen and Parachute was down to about 11.5 months, compared with nearly 18 months at the end of 2011, according to the Market Trends report put out by Stewart Title.
In Glenwood Springs, the absorption rate has hovered around six months for the past two years, according to that report.
Bob Rulon of Land Title Co. in Glenwood Springs, which also tracks and compiles local real estate activity on a monthly basis, said June transactions in Garfield County increased 21 percent over the same month last year. The dollar volume for those sales was 90 percent greater than June 2013, he said.
Single-family home sales were up 11 percent in June, and sales of multifamily units were up 26 percent. However, year-to-date numbers are still only about 1 percent ahead of last year countywide, Rulon said.
SALE PRICES RISING
In Glenwood Springs, the average price of a home sold so far this year through June has been $427,550, he said, while the median price has been $339,450.
"We are seeing some positive traction, but the inventory of houses that are on the market is what I hear most people expressing a concern over," Rulon said.
In particular, "There is not a lot available on that lower end in terms of what is coming available on the market," he said. "You just can't find a whole lot that's priced under $250,000."
Because Glenwood Springs doesn't have much new home construction, defined as anything built from 2004 forward, another problem is an aging housing stock.
For instance, a typical house that's on the market in Glenwood is a three-bedroom, two-bath, 1,500-square-foot house built in the 1930s in the older part of the downtown area that's listed for $319,000. Another listing is for a two-bedroom, one-bath, 874-square-foot house build in the 1940s for $349,000.
"With the lack of inventory, we do see that some of these older, smaller properties are moving pretty fast," said Amy Luetke, broker/owner at The Property Shop in Glenwood Springs. "Some things lag on the market, but if it's priced competitively it will move.
"Anything in that $200,000 to $400,000 range moves very quickly," she said. "Across the board, the inventory remains low, but the pace of the market is steady."
The fact that the market is improving and home prices are increasing is another of city staff and P&Z's concerns in recommending denial of the Glenwood Ridge project.
That's because the developer has requested that it be exempt from the city's affordable housing regulations, which normally require that 15 percent of units in a new development be deed-restricted with income-specific price points, appreciation caps and owner occupancy requirements.
The developer has countered that, by building modest-sized homes on smaller lots, Glenwood Ridge would provide more affordable houses without a need for deed restrictions to maintain affordability over time.