I'll nip the rose in the bud: I'm not buying the spinology garbage published at www.PikesPeakFacts.com. I am an optimistic sort, but I'm the son of a journalist and I even came to faith thanks in large part to my own skeptical, need-to-examine-the-evidence habits. The data on www.PikesPeakFacts.com reaks of a deliberate attempt to portray the real estate market as "not as bad as the Gazette says it is," and in so doing, creates even greater consumer skepticism of the real estate industry in general. Anytime your mission is designed to be in opposition to something (see Microsoft's plan for retail outlets!), it usually comes across like a lead balloon.
Reality in Realty: The market just posted a startling 413 closed single family units. Some context: the only time in the last 16 recorded years that there was a month lower was February, 1995. That's THE ONLY MONTH with fewer than 413 sales. The average sales price dipped to a level it had not seen since September, 2001. It was off 15% from the same time last year and 12.6% from just the previous month.
But I do agree that the market is not as bad as the Gazette says it is. How can I have it both ways, consumer-empowering truth teller AND optimistic, capitalist, I-need-people-to-buy-real-estate REEL-U-TUR? Isn't this a conflict of interest brewing?
Here's the data, pretty objectively presented in THIS MONTH'S STAT PACK. That's step one. Read it for what it is.
The second step, my fairly bullish position:
- Market prices (I'm self-imposing a ban on the word "Value") are low. Just as foreclosure properties are increasingly a good deal, they are pushing the prices of the non-foreclosures down. If you're in a neighborhood where 8 of the last 10 that sold were distress sales, sorry Charlie, you lost bucks.
- Interest rates have increased the affordability. I am terrified that in the midst of 8% unemployment, the National Association of REALTORS published that housing affordability is better now than any time in the last 35 years. That sounds like the work of David Learah and not Lawrence Yun as the NAR economist. It sounds like buying a home is a good idea for everyone. It's a bad idea for a lot of people right now. But it is factual that a 5% interest rate is basically unhead of in the last 5 decades. If you have a job, cash for an earnest money check, good credit, then get your pre-approval in order fast. Don't look until you have that pre-approval. You'll be really sad when a good property gets away. See below.
- Supply and Demand favors appreciation: Okay, what am I smoking? The market has 11 months of inventory to sell through and I'm saying supply and demand favors appreciation? Well I'm not saying it universally. I am saying it selectively. In Pine Creek: there are 13 homes with 4 bed, 4 bath, 3 car garage 1999 and newer over $500,000 for sale. That's it. Go back to 2005: there were more. 2006: there were more. 2007: a lot more. 2008: a lot more. There are now 13. Also in Briargate, where the average sales price is well north of $300,000 still, there should still be some way you can find a home for under $225,000. Well guess what? There's 58 days of inventory in that price range. Regardless of features, under $225,000: 58 day supply of housing. And relo season has not begun.
- There were fewer listings to start February than January. Has never occured in the 16 years PPAR has tracked that number. January is a fat listing month. January put on 15% fewer listings this year than last.
- Yes 413 is a crappy number. How about 1145? That's the number of committed under contracts and pending sales in the MLS right now.
- Go downtown and look under $300,000: Nothing. Squat. Nada. Sure, get over $500,000 and there's a bunch of stale Old North End homes for sale. No one accused the Old North End liberals of being fiscally reckless. They don't want to play, and besides, where are they gonna move? Wood Ave.? There's nothing for sale on that street...
- Manitou and multiple offers are the norm on anything in great shape. Since pricing is so subjective in 80829, and great condition is rare, look out.
- Old Colorado City lost a mere 1.4% in value last year. I can't wait to put my listing up on 23rd in a month.
- My own home neighborhood, Pinecliff. The average asking price in the N/W right now is just above the average selling price. This for the most southerly neighborhood in D20 composed of entirely custom homes on 1/4 acre or larger lots with a community park and 450 acres of Ute Valley Park open space. Only 9 homes for sale out of 500, and 17 have sold in the last 12 months.
Okay, so those are limited areas. Why the optimism?
Colorado Springs is about to gain 11,000 soliders this calendar year and has the base housing for only 1/3rd of them.
I am not one of the confused economic theorists who thinks that the average grunt will buy a house. I know that they won't. They might buy a car, they might buy an engagement ring, but a house... pretty far from likely.
But they will need shelter. They will create a trickle-up effect in values. There are next to no available rentals in Fountain Valley right now. But there are 22 homes for sale that are: 3 bed, 3 baths, 2 car garage, 2000 and newer with 1600 finished square feet or more from $140,000 to $200,000 in Fountain Valley right now. Throw out year, price and square footage, there are 133 homes that are 4 bed, 3 bath, 2 car in F/V. Those are all amazing properties to look at for rentals.
The people buying right now? They're not investors. Thank goodness. It was afterall the investors who were gobbling up 40% of all homes purchased in the 2nd half of 2006... AFTER the market had found it's peak (again, clarification time. Those who bought then were more likely speculators than investors. Those who bought for gain rather than cashflow also usually were leverage past their eyeballs). The buyers now are people in the midst of life change. Marriage. Kids. Long Commutes. Divorce. Mom and Day moving in. Kids moving out. These are people who sat on the sidelines for three years while the real estate market got really wacky. Now... they see prices depressed. Interest rates below 5%. They've been good. They have a reliable job. This is there time. They're acting. They see the personal motive, and for them, it's a lot more potent than the profit motive.
Of course, there isn't a soul looking who wants to go and buy "fair market value." Every one wants a deal. Good for them. They're out there. At least once a week I see a headspinner. Twice last week I was involved in mutliple offer situations though. And that tells me all I need to know: when local buyers are fighting over the good properties... these are areas where a recovery is already taking place.
We are trained to think that the high end will pull this market up. Don't look for it there. Most everything (Pine Creek a rare exception, Skyway Heights and Estates another) over $500,000 has an eternity before buyers find it. This will probably be a record low listing year for high end properties. But they will recover value based on demand. What will happen is that the foundations of home-ownership are actually being recast. Who does the $8000 credit favor? Everyone. It will just take time though for the first-time buyers and fence-sitters of the last three years to unclog some of that lower inventory under $300,000. Once that springs free, these sellers become move-up buyers and so begins the progression.
It's already happening in some parts of town. Once relocation season begins, it will commence more quickly in more areas.