All the data is Posted Here.
The hurry-up to the analysis is here…
Did the Gazette just describe the real estate market as “Soaring?” What happened to “plummet, freefall & plunge?
Remember November, 2008? There was not a cable-news network minute that went by without some new bank showing signs of weakness, some new stock plummeting, some new unimaginable sum in the billions of dollars being dedicated to a bailout of some enormous, household name entity that was ruled too big to fail. It was being called the biggest Wall Street Panic since the Great Depression and calling it the Great Recession seemed to be a euphemism for investors that were losing money to the tune of 30 to 60% in a single year. Terminology like plummet, freefall and plunge was routine. It was accurately applied to housing as average selling prices lost over 15% in 4 months and demand shriveled up.
December 2nd, 2009: Sales Increase 59%. Last November was the worst November in 15+ years in the Pikes Peak MLS. Numbers are numbers. A cynic looks at that increase and says, “that’s like the Broncos posting 10 points last week in a loss and winning with 16 the next. So what? The offense is still broken.”
In some regards, the system is still broken. There is less than 4 months supply of housing under $250,000 (that is NOT broken, that’s actually a hot-market). But there is over 10 months supply above $250,000 (that’s pretty slow, even for late Fall). If the numbers are used just to describe where things are today as compared to the recent past, the story is told halfway. It is better now than it was then; but how could it really be worse?
Where the numbers start to really illustrate and tell the whole story is when they are mapped and analyzed for trends. Months of Inventory has not been below 6 months on December 1st since the heyday of the boom market in 2005. That’s where it is now. Average price citywide is about $20,000 less than that time and interest rates are a full percent lower. And there are tax incentives to stimulate more demand, most importantly from first-time buyers who by definition, do not have a home to sell. The December Jobs Report showed a significant decrease in the rate of unemployment filings and durable goods orders are coming in ahead of forecast. Baby it’s cold outside… but the sun is shining. Consumers are cautious and value-oriented… but they are no longer terrified.
What Lies Ahead?
Be prepared for lots of forecasts and lots of media attention in the slow December News Cycle to be dedicated to the green shoots of a housing recovery. Some of this will be helpful, some of this will be accurate and a lot of it will paint with a brush broad enough to cover all 50 states in a minute and five seconds. The Real Estate Bust has definitely shown that real estate can move downward as a nation just as it can move upward as a nation. But the extremes of the market have been in coastal areas and places that posted unsustainable rates of growth. Middle America, places where population has continued to grow, places with lower than national rates of unemployment and neighborhoods that were less impacted by the explosive growth of new construction from 2003 to 2006 are the places where the recovery has already sprung. All of the above market conditions apply to Colorado Springs greater metro area.
“Value” will be the operative phrase to describe any recovery. The 2009 Profile of Home Buyers and Sellers showed that the overwhelming reason First-Time Buyers chose to buy a home in 2009 was NOT the First-Time Buyer Tax Credit. Over 60% had the desire to own a home. The 2nd reason? Affordability (10%). Third? Change in Personal Situation (8%). Only 6% sited the tax credit. And yet look at those November sales when the tax-credit was initially supposed to end. It is a nice carrot that helps propel buyers past the tipping point of personal desire, decent selection, low interest rates and real estate at a four to seven year low in price. The tax credit is eventually unsustainable and it certainly does borrow buyers from the future and activate them in the present. But what better time to do that than when housing affordability is at one of it’s highest levels in record? Who else will consume the inventory of properties of willing (or unwilling) sellers who either need to move or hope to change their real estate investment? It greases the wheels of recovery so that the majority of participants can once again begin to buy and sell real estate.
Make no mistake, the old days will not return and the market has changed in nature and what consumers consider “valuable”. Over 90% of 2009 buyers started their search online; 37% found their home via the internet, and only 33% by their REALTOR. That sends an enormous message to sellers: BUYERS WON’T BE FOOLED. Buyers want thorough property descriptions of high-quality properties and will not waste time looking at over-priced and under-conditioned properties. Affordability has increased. Probability of sale will begin to increase. But that will happen only for properties (and sellers) deemed a better value than their peers.