Tag Archives: Colorado Springs Real Estate Market Data

The Stat Pack, January 2013: What’s Squeezing the Market?

We don’t believe in silver bullets. It’s why cable news doesn’t work well for us. Things don’t get easily distilled down into one minute 15 second soundbites of information.

We also believe that to really understand something, you have to do two things:
1.) Have a regular practice, and in real estate market reports, that means a somewhat religious consistency to doing the same data each and every month. It’s in exercises like these that patterns are best seen and understood.
2.) Thoughtful analysis comes from good questions. There are such things as dumb questions. But a bigger problem is taking things at face value. Prices are up. Supply is down. Demand is up. Contracts are up a lot. Well… why is all that happening?

As we change The Stat Pack this year into a blog format, this is our monthly second installment, on the theme of, “why’s that happening?” This month: What’s Squeezing the Market?

Greenshoots 2013: Powers, PWR MLS Area

Powers is an area characterized by it’s newness. The “old homes” in the area date back to 1994, and with the modern consumer thinking about 10 to 15 years of ownership (ought to put that record-low interest rate to good use), the lure of newer construction is promising. For investors, the same holds. Powers is an area where homes rent well and because the homes are newer, in theory at least, they should have less maintenance. So it’s little surprise to see some of the higher probabilities of sale and large numbers of units sold in these areas.

One very interesting theme we noted: the software used to construct these graphs lumps together our MLS’s U/C (under contract) designation with the active listings. These are properties that are under contract but supposedly are continuing to show to buyers. Well in many areas, we saw the number of under contracts in early January was 2 to 3 times larger than the monthly rate of sale for the area. In other words, 2012 was ending with a bang carrying over into 2013 in many of these MLS areas.

Indigo Ranch: this area consistently produces most of the sales over $300,000 in the Powers area. It’s one of the newest areas, and the homes sell at the highest dollar per square foot in the region.

Indigo Ranch Scattergram Indigo Ranch Neighborhood Pattern Indigo Ranch Buying Pattern Indigo Ranch Time to Sell

 

Ridgeview: One of the newer stretches of Powers, Ridgeview sits to the west of Indigo Ranch. It had more regular pricing than Indigo, but similar probability. Almost comically, the best time of year to sell in Indigo Ranch of Ridgeview? Anytime. They’re always seeing properties move.

Ridgeview Scattergram Ridgeview Neighborhood Patterns Ridgeview Buying Patterns Ridgeview Time to Sell

Stetson Hills was divided into three north-south areas, West, Central and East, with West characterized as West of Charlotte; Central between Charlotte and Peterson; and East, east of Peterson.

West Stetson Hills: a bit of a surprise, this area did not sell as well (probability-wise) as the two Stetson Hill segments further east, or compared to any of the PWR areas. The surprise due to the fact that it was a little less expensive than other areas on average.  

Western Stetson Hills Scattergram Western Stetson Hills Neighborhood Pattern Western Stetson Hills Buying Pattern Western Stetson Hills Time to Sell

Central Stetson Hills

Central Stetson Hills Neighborhood Patterns Central Stetson Hills Scattergram Central Stetson Hills Buying Pattern Central Stetson Hills Time to Sell

East Stetson Hills

Stetson Hills East of Peterson Scattergram Stetson Hills East of Peterson Neighborhood Patterns Stetson Hills East of Peterson Buying Patterns Stetson Hills East of Peterson Time to Sell

 

Springs Ranch was divided into two east-west areas, North Springs Ranch, north of N. Carefree; and South Springs Ranch, south of N. Carefree

North Springs Ranch

Northern Springs Ranch Scattergram Northern Springs Ranch Neighborhood Patterns Northern Springs Ranch Time to Sell Northern Springs Ranch Buying Patterns

South Springs Ranch

Southern Springs Ranch Scattergram Southern Springs Ranch Neighborhood Patterns Southern Springs Ranch Buying Patterns Southern Springs Ranch Time to Sell

Some MLS Marketwide baselines… Probability of sale last year for the entire MLS was 63.8%. That was the highest probability since 2005. These graphs sometimes reflect mostly lower numbers, but that is because the software counts under contract properties as still “active”. In essence, these are contracts, and in certain cases, we notated what happens to months of inventory and probability of sale if you “count the contracts” that are there at the start of the year. Saying that, for the most part, Northgate inventories are low carrying over into 2013, but there are not a lot of under contracts in these neighorhoods outside of Flying Horse.

If you would like any of these slides emailed to you for specific information, hit me up at Benjamin@BenjaminDay.com. Yes, we realize that they read a little small, but we’re preciously attached to our WordPress format, so, sorry.

The software used to create these graphs is from http://www.Focus1st.com and we used a date range of January 1, 2012 to January 11/14, 2013 for all of the searches, doing as many as possible on two different business days to get a competitive comparison for a single snapshot in time.

Disclaimer time: Benjamin Day composed this blog post and is solely responsible for it’s content. This information reflects data and opinion of real estate licensee in The State of Colorado. Based on information from the Pikes Peak REALTOR Services Corp. (“RSC”), for the period January 1, 2012 through January 21, 2013 . RSC does not guarantee or is in any way responsible for its accuracy. Data maintained by RSC may not reflect all real estate activity in the market.

How’d we do? Our 2012 Projections in Review

Since 2007, I have constructed an Annual Report and Forecast for my real estate brokerage. For four years, that was an ERA Shields document. For the last two, I wrote one for Selley Group with my business partner, Hannah Parsons. Part of being a mad scientist of real estate data is perfecting your practice and refining your methodology.

In 2012, we missed on one part of our forecast: appreciation. We only predicted 1.5% to 3% appreciation. For the year, the city ended up climbing 5.8% in average price, and more than 10% in median price. The primary reason for this gain had to do with the surprising drop in interest rates (something else we didn’t forecast… I mean, who outside Ben Bernanke saw 3.4% 30-year fixed mortgages on the horizon last January?), something we didn’t dare forecast.

Here were our bold predictions:

So in 2012, what are we predicting? Appreciation. Not lots of it, but it seems nearly impossible not to happen based on the scarcity of inventory. 

In 2012 we are predicting 9000 single family and patio unit sales, and gains in value between 1.5% and 3% appreciation. The 2012 calendar year has debuted with only 5 months of inventory, the lowest experienced since 2005. The low inventory can not be over-estimated. This is now a self-correcting, laissez-faire market where there is very little government intervention to manipulate behavior, and buyers and sellers are self-correcting their real estate problems. The low inventory and less than 6 months inventory (6 months is considered a balanced market) will have a marked effect if buyer activity continues at a steady pace…

The market of durability will actually expand in 2012. A bold prediction we are pretty certain of is that this will be a trickle up recovery, not one fueled by the promise of appreciation, but instead by the promised of higher quality of life. Investors are often seen as the necessary catalyst for a market recovery, but there are plenty of families in their late 20‘‘s to early 40‘s that would love to find “it” for the next couple decades, lay some roots and get after the business of raising a family. 

In other words, we nailed other predictions: We predicted just over 9000 single family units closed. The 2012 total: 9146 (missed by 1.1%). We predicted an expansion of the durable marketplace, where buyers would extend their horizon of ownership past ten years due to low interest rates. Despite the expansion we saw coming in the marketplace, we said it would be “kind of a big deal” if there was more than one month that closed more than 900 units, and true enough, only July topped 900 (973). We pointed out that at the turn of the new year, there were homes listed for $40,000 to $50,000 below tax assessment; those disappeared by the end of March. We said that the market had corrected and was now poised for recovery (most people were predicting a positive market correction, but we realized we were past the turn) and that the fuel behind the recovery would not be investors, but primary resident owner-occupants armed with a desire to improve their quality of life.

And we concluded our forecast last year with the statement: “The shrewdness and durability of today’s buyer is exactly the kind of solid footing our country needs to be standing upon.” We didn’t make an appeal to the consumer, to the political machine or to lending institutions. We instead said that the philosophical process of consumer decision-making was durably unraveling the market.

What makes this review so interesting is that consumers are more often than not choosing to buy real estate for quality of life reasons. Some of the new data we are looking at for our 2013 forecast is unraveling what is going on in new construction. New construction permits were up 53% in 2012. Can you see the pattern as to why? Durability. The average consumer wants to own their home 10 to 15 years. If you’re going to own it for 10-15 years, think about the 2028 real estate market and what consumers will demand for resale on that investment… maybe two 95% energy efficient furnaces, 2×6 construction with R-19 to R-25 in the walls, cubic footage more important than square footage, landscaping that is easy to maintain primarily in regards to persistent drought. Now think about the areas that are experiencing success all of a sudden: Flying Horse and Cordera. Here, they heavy HOA dues that were seen as a threat to sale in 2005 and 2006 are actually now a giant benefit because it is the HOA that is maintaining and providing the convenient local open spaces, and the homes that are being built on those lots more often are putting their emphasis into the exterior wrap and thoughtfulness of the cubic foot, rather than massive square foot dressed up with excess features.

One other trend: consumers have always bought benefits, not features, but this is a place where we are seeing a rather cavernous gap in value measurement in the marketplace. The exceedingly tight appraisal standards are still based on a feature-calculation, the objective, easily measured quantifiable approach. But like we said last year, only our dissatisfied clients buy a home off of a spreadsheet. An appraiser might discount $8000 to $10,000 for a home backing to a four-lane road. We think buyers discount it by $25,000 to “I won’t even look at it.” That neighborhood could have an 80% probability of sale, but the home backing to the busy road has a 20% probability of sale. Now place a dollar figure on that. Additionally, if you’re living in a home for 15 years, does a drive-under garage work well with your Costco stock-up ways? Does a sloping hillside really provide valuable privacy, or does it just keep the kids inside when your preference is to have them outside playing? It’s nice to have a great little elementary school nearby, but if you’re buying with an interest rate so low you can readily imagine paying off the loan, what about the middle school and high school? These are the harder to calculate benchmarks, and these are the places of value that we see buyers wrestling with, today.

Market Statistics for November, 2011 (or 2001?), Colorado Springs

s

Juicy, Meaty, Relevant, Insightful and Not Afraid to Tell You So Market Data.

What would be stranger, a real estate market recovery or the Broncos winning the AFC West? Both would be pretty weird, right? As of November 8, 2011, all the data is in place for a real estate market recovery locally. That does not mean a market recovery is about to happen. It doesn’t even mean it should happen. It just means that it can. The only way it will happen is if consumers allow it, and by consumers, I mean both buyers and sellers. The market has 4.00% interest rates. There last time there were so few homes for sale in November it was 2001… as in ten years ago. So throw out “lots of inventory to choose from” because it is not true. There is tight inventory. There is only 5.22 months of inventory several months after peak season.

The last time the market was this good in Movember, was BEFORE Jake Plummer. But I couldn't bear the thought of putting a picture of Brian Griese up here.

Prices are down on average 4.5% for the year, yet there is only a 4 month supply of housing for properties under $275,000 where 78% of the transactions have occurred over the last 90 days. In other words: the real estate side of the ledger is really tight. And yet: an opportunity is only an opportunity if there is risk. Want a real thrill? I mean a real thrill? Jump out of an airplane. The speed. The rush of the air. The adrenaline. The catch: you have to jump out of an airplane. But boy… what an opportunity. The focus of the Stat Pack this month is to dial in on the personal rationalizations, dreams and hopes of people making elective home-buying and home-selling decisions. The seeds of 2012 market activity are sewn now, like tulip and crocus bulbs underneath the winter mulch. The eureka moments of “I don’t  need all this space”, “honey, did you see their master bedroom?”, “We need more space with twins coming”, “this commute has gone on long enough” tend to happen now, during the coming holiday season when individuals gather at other houses and formative real estate decisions germinate. As consumers begin to form their opinions and thoughts, they should do so with accurate information, but also, personal reflection and introspection. What are you trying to accomplish with your home sale? What’s your why? Why do you say you need more space? You said you wanted a nice master bathroom, but then you moved onto a benefit of “light and airy”… what will the benefit of this next purchase look like? Where will you be in life in two years? Ten? Do you want to be tied down to one place for at least a half decade? How much work around the place will your lifestyle allow? How many weekends are you willing to donate, vacation time and favors cashed in? How secure is your job? How much of your life is really under your control? The data says do it. Now what does your gut say?

Red Numbers: Sales Down… but so too listings, months of inventory…

If you see RED, it ought to get your attention.

Here is a seriously RED number: February 2011 returned a lousy 448 single family sales. That was 10% lower than… February 2009. In February 2009, for all intents and purposes, the local real estate market was declared in a flat spin and the popularity of gold was spiking. Last month saw 10% fewer sales than that month. Yes, the March Stat Pack is cooked and served up HERE.

Yet at the same time, listing volume was down by a similar amount. One of the slowest inventory builds ever witnessed happened in February 2011. Combined with 5 days that saw 0 degrees for the high, there is plenty of reason why the short 28 days of February saw such low sales activity:

  • There wasn’t much to buy in the first place…
  • Rates started to climb then began to drop at the month’s end as things heated up in the Middle East, oil started to rise and Wall Street got nervous
  • It was cold outside. REALLY cold.
  • And shoot, there still was not much to buy.

Here is a chart that compares the market on March 1, 2010 to March 1, 2011. Remember that one year ago there was an $8000 tax-credit carrot enticing first-time buyers into the market. That carrot is not here. That single reason is why the low sales of February 2011 (lowest February totals since 1997) saw a $28,000 average sales price increase from one-year prior.

 

 

 

 

 

 

 

 

 

 

 

 

 

The inventories year over year are very similar and the rate of sale is actually similar for the trailing 90 days. But what is red indicates what is lower:

  • the number of listings for sale, especially over $400,000
  • the number of sales, especially under $250,000
  • the months of inventory, especially over $250,000.

In other words, the game is changing: the bread and butter of the winter months, local first-time buyers: for now, they’re done. They bought last year. Or the year before. But who is starting to buy: relocating buyers that saw the writing on the wall in 2007 and didn’t buy and now are hungry for a deal. They typically buy on a shorter timeline (three to ten days of shopping, lots of online use) and generally buy the best-available home.

As bleak as the unit sales were for February, almost every other index worth watching showed health returning to the market: interest rates ended up dropping 0.2% at month’s end, supply actually went down, demand began picking up (1099 pending and under contracts on March 8, 2011), months of inventory shrank and average price spiked.

Read it all HERE.

It’s About the Listings…It’s about Interest Rates

The 2010 Sales Year was characterized by an abnormal addition of listings to the real estate market in the late winter and early Spring. In February, 2010, inventory swelled by almost 10% in a single month with the gain of over 400 units between March 1 and April 1. This was after February added almost 200 listings to inventory. The seven month run up in inventory from January 1 to July 31, 2010 saw a gain of almost 50% in total listings for sale.

 

Early 2010 Compared to Early 2011

While demand never quite equaled the same levels experienced in 2009, part of this reason was the double-sided promise to buyers that their opportunity was never getting away from them: More listings just kept coming on the market, allowing them to prolong their decision, and the steady drumbeat of “interest rates are sure to rise” was an outright falsehood as rates actually dipped below 4.00% in October (a full 1% improvement over February, 2010). These two actions allowed buyers to prolong taking action.

 

In 2011? New listings are coming on the market, but they are beating absorbed by new buying activity. There were 464 unit sales of single-family homes in January 2010 and there were 460 in January 2011. The average selling price of these two months was all of $150 different. In other words: the same buyers were buying the same homes at the same rate. Interesting side note: 2010 had an $8000 tax credit carrot to get buyers to perform. That’s kind of a big deal when $8000 represents a complete first-time buyer downpayment at $210,000 (the January average sales price for the month both years). This year offers no such carrot. But buyers performed in the same manner and volume, absent federal stimulus.

Also interesting: January 2010 gained 170 listings, February 2010 gained 240 listings and March 2010 gained 412 listings. In 2011, January reduced in supply one listing, and February is only up 50 units. Interest rates are about the same as they were this time last year. Again, the drumbeat of “they’re sure to go up” is on the street, and the reality is that they are up close to a full percent in the last four

Freddie Mac 30 Year Avg since 2005

 

months. Why this is interesting: Conventional Wisdom  was that the market was getting better in 2010. This was “proven” because more people were buying homes in the spring of 2010 then the (miserable) spring of 2009. But the quiet under-current in 2010 was that that inventory was increasing at a rate that ultimately had 50% more listings on the market in the summer than the start of the year. While people were briskly buying houses in early 2010, months of inventory, and therefore, seller’s ability to dictate pricing, wasn’t getting any shorter because the ratio between listings and sales wasn’t changing. But so far in 2011, the big bounce in listing inventory has not happened. However, buyers are still buying at about the same rate, and don’t have federal stimulus inviting them to do so.

So far in 2011 (and that’s all of 50 days), listings for sale have increased slightly more than 1% while the rate of sale has remained the same (without a tax credit stimulus) and interest rates after steadily rising for four months have retreated 0.1% in the last week to come back below 5%.

This doesn’t establish a trend. But if you’re a buyer thinking “where are all the new listings I was expecting?”… you’re not alone. If you were hoping to buy based on a 4.25% interest rate, your window might have already closed. Over 30 years, the increase in interest payments from 4.25% to today’s 5.00% on a $210,000 loan is $35,000. I was told the other day by a buyer that the real cost of buying a home is the amount you finance. That is kind of true.

 

Comparison of Loan Values, Interest Rates, and 30 Yr. Paid Interest

 

But literally,  that’s only half of the equation. The price you pay is the amount you finance at the interest rate you finance it at.