The post that makes enemies faster than friends. In the interest of covering my own fanny, this is analysis based off of data that measures multiple metrics and then draws conclusions when comparing one set of data to another set. It is a formula set designed to assist buyers with purchasing decisions where their home-ownership may be less than 3 years. If that’s the case, The Red Light Properties have supply and demand trends that look like they will continue to put negative pressure on value. If you simply “must have this neighborhood”, or “must have this home”, or you plan on this being your last home purchase and you don’t care if it loses value or not… this post will mean nothing to you. This is a cold, calculated presentation of data as to whether or not these areas will appreciate (or depreciate further) in 2010. My forecast is that the average sales price all of these areas will continue to lose value next year.
To read about the Goal of This Where-to-Buy Series of Posts, Click Here.
To find out the recommended areas that have probably swung past the bottom of the pendulum and are already appreciating, read about The Green Lights. To see the Data for the Green Light Neighborhoods, that is found HERE.
For the bigger risk takers (but probably where the timing favors a turn to appreciation in later 2010), The Yellow Light areas are documented HERE. Note: I accidentally omitted Gleneagle in that post, which has stabilized pretty significantly in the last 18 months and will probably be in appreciation-mode by 3rd quarter, 2010. Up-to-Date Market Data is found here at THE STAT PACK link of www.BenjaminDay.com.
The Red Lights for the most part represent neighborhoods where the average selling price is over $400,000. In some cases, even in the boom years of 2004 through early 2006, it was more probable that a home would fail to sell than actually sell in a ultra-high-end neighborhood like Kissing Camels or Broadmoor Resort. But the impact of the Great Recession, consumer pessimism, tightened underwriting and Jumbo Loan Regulations starting on any loan over $417,000, and the investor-fueled 1.5% to 3.0% penalty in interest-rate since September, 2007 has had a huge effect on the higher end. These are the same factors that have driven down the average sales price in Colorado Springs from over $270,000 in July, 2007 to $213,000 today: there is not only less demand for a high-end home, it’s just plain hard to buy one.
A Few Good Buys, but New and Expensive will Sit Forever:
Jackson Creek, Stone Crossing/Middle Creek, Erindale/Pulpit Rock and Sunset Mesa/Saddlerock all have average on-the-market values considerably higher than the year to date average sales price. All four have had less than a 47% probability of sale each of the last two years. All four have an average year-to-date sales price that is less than the six -year average. Of the four, Stone Crossing has withstood price pressure the most, only off a couple hundred dollars from the six year average. But the average sales price is only $20,000 higher than the year-to-date sales price and with 15 year-to-date sales and 18 on the market (15 months of inventory), the supply is overwhelming demand and will force values down.
Interestingly, all four areas have a pretty large price spectrum, from as little as $180,000 in Pulplit Rock to $600,000 along the cliff edges, $225,000 in Jackson creek to $650,000 for a newer Saddletree with huge lot and views. So to some degree, there are some very good buys in these neighborhoods. Homes priced less than the average sales price have a greater probability of sale. Homes priced 15 to 30% above average sale price however will have greater difficulty.
The Monument Funk
Woodmoor, Bent Tree/Higby and King’s Deer are Slow, Pretty Slow and Very Slow. Each of the last 3 years they have averaged less than a 47% chance of sale, and all have a year-to-date sales price that is significantly lower than the average price of all listings presently for sale. There is a 9 month supply of housing in Woodmoor, 16 months in Bent Tree and 20 months in King’s Deer. With so much of the “average” property in these areas valued at more than $500,000, the ramifications of the jumbo limit capped at $417,000 are huge: not many buyers have $80,000 or more to put down on a home. The rare, secondary financing that is available to buyers usually is no more than $50,000. So a home asking $550,000 in one of these areas will be competing with another, average-priced home. A buyer shopping in any of these areas could wield enormous leverage in terms of negotiating a lower price.
AWOL Demand, Decent Supply
Three well known luxury areas have seen buyer demand dry up to the tune of a 1 in 3 probability of sale.
Cedar Heights is actually rebounding somewhat and has only 8 months of inventory right now. That’s reasonably low for Cedar Heights. The problem however is that the average asking price is a full $200,000 above what has been the average selling price. Recent sales have submarined values to 2004 levels and today’s buyers will likely make similar demands on the present listing inventory. Upper Skyway and Skyway Heights makes a somewhat surprising appearance. Broadmoor Bluffs and the Spires has registered a dramatically higher sales rate in 2008. Companion neighborhoods Stratton Forest and Stratton Preserve just saw their first sale in two years last month. Perhaps it is the age of the inventory or the difficulty in access, but 2009 has not been a great year near Bear Creek Park. The most heavily impacted area by far, and possibly in the city, is University Park. University Park has a large number of million dollar dwellings and lots valued at over $250,000. However… there has been a 29% chance of sale over the last three years and the average selling price this year is well below the average in 2004. Worse news for present sellers: the average asking price is $180,000 above the average selling price year-to-date. Sellers today will very likely have to make big price concessions to move their property.
The Ultra High-End
The massive economic upheaval and how consumer values have changed (and how they have stayed the same) is readily evident in three neighborhoods known for million dollar properties. The Broadmoor and Kissing Camels are hard places to sell a home, but are showing signs in 2009 that traditional neighborhoods commonly associated with luxury (the Broadmoor) and locations with a true, one-of-a-kind location (Kissing Camels) have value, even in a bad economy. The Broadmoor Resort meanwhile shows the difficulty of selling in a true custom-home neighborhood: one man’s custom, is another man’s consolation. There is a single MLS sale recorded in the Resort this year (translates to 14.8 years worth of inventory). There are additional new homeowners this year in the Resort, but the idea of buying someone else’s home has less value when builders are willing to build “exactly” what they want… and charge less than they did four years ago.