Tag Archives: Pine Creek

Mid-Year Review: July 2011 Market Stats

Click Here for Mid-Year Review Market Report

The Summer Viewing at Pikes Peak Urban Living is on the cat fight between two market metrics: Average Sales Price and Months of Inventory.

Months of Inventory is a handy-dandy metric to forecast, predict or… guess… what the market will do next. The barometer that has traditionally held sway is a 6 month supply of housing equals a neutral market. Get below six months and stay there and the market should see appreciation and increased seller-control. Go above six months, and that much to choose from sways control to buyers and prices drop. The majority of the last four years have been in excess of 6 months with a few brief months in 2009 under 6 months supply. July 1 showed a reading of 5.5 months. After three previous months from 5.9 to 6.1 months of inventory, that should be a predictor of prices going up.

Yet they haven’t done that.

Average price year to date is off 4% from a year ago. A lot of this was the post-tax-credit malaise that wrecked the market last spring. REALTORS went from running their engines at 110% in April to idling them in May, and never really getting them out of neutral the rest of the year. This year has been somewhat spastic, but overall, prices are steady to down then they’re showing appreciation.

Most everyone has an easier time understanding what has happened as opposed to grasping at what might happen, and correspondingly average price gets a lot of press. But as I spoke about last week, the relationship between units for sale and units sold is pointing to possible to likely improvements. The market has crested in inventory and is in the six to seven month cycle of fewer, not greater listings. There will be new listings each month, but not at the rate that they were before, and many good new listings will be recognized more readily as valuable by active buyers because buyers operating in the second half of summer and early fall generally have to make quick decisions. These are general conditions that don’t always hold, but with fewer than 4800 listings for sale, and two more months under 6 month’s supply likely… it will be interesting to see what happens to pricing over the next six months.

To see the active market numbers, Click Here for the Stat Pack.

The Relevance of “New” to Seller’s in Today’s Market

Through May 2010, Single Family Building Permit activity was 45.8% ahead of the same pace in 2009. June 2009 was the month that single family permitting actually returned to life, so the first five months of this year presents a very valid point of reference for one of the major ramifications effecting the marketplace: the value of new.
Actively marketed sellers need to examine for themselves what the same dollars might buy somewhere else in El Paso County. This might seem ridiculous and foolish: why compare downtown Colorado Springs to Lorson Ranch in Fountain? Why compare Peregrine to Pine Creek? How can Falcon in the $300,000’s compare to Gleneagle? Would an appraiser ever compare these two areas? Never. But is a buyer? Maybe. Okay, probably. Okay… most likely. Hey, if you wanted to sell a ’99 Benz for $10,000, and a buyer could get a 2006 Honda Accord for the same price and mileage… that’s how consumers tend to think.
There are 515 homes for sale from $225,000 to $250,000. The average sales price market-wide in June improved to $237,000 and change. So why is there an 8 month backlog of sell-time in this price-range? Consider: Classic Homes is no longer the city’s largest builder. The same company that produced more than 1200 homes in 2005 now has less market share than two companies that did not even exist in the market in 2004 (Journey Homes and St. Aubyn Homes). These two builders, along with Challenger Homes, account for 1/3rd of the marketshare among new home builders. Classic is now fourth. These Top Three builders are all producing homes in the $200,000’s (and no, that’s not the advertised “from the $200K’s… those are closed values). No, they’re not in Oak Valley Ranch, Divine Redeemer or even Springs Ranch areas where homes in this price range should be flying off the shelf (but aren’t)… but it begins to explain why resale homes are struggling to sell from $200,000 to $300,000.
Classic Homes builds entry level homes, but their average sales price is $375,000. The new-build focus from 2002 to 2006 shifted to a higher and higher price bracket due to the ready availability of cheap credit, especially jumbo credit. After the market freefall and credit crunch, the game had to change dramatically. While Saddletree/Symphony is still making a profit, and Keller, Vantage, Acuff and Classic all seem to have “survived” the downtown, the growth is not in their price range: it’s in the average-priced-home available with a two car garage, new HVAC efficiencies and shiny new appliances.
Of severe significance: average now equates to a custom experience for the home buyer. At average price… they can pick their colors; their trim; their flooring; their appliances; their landscaping. Double that average price point, and how special does a resale home have to be when there are granite slabs to be chosen, wet bars to be designed, 16″ tile to be selected for the two-person shower? In the higher price brackets, a new built $500,000 home is not the same as a new built home from four or five years ago. First, it is probably energy-star rated. The added insulation and HVAC inspections cost more money. The counters are probably slab granite. The appliances are probably standard stainless. The lot has probably been discounted. It might have a standard basement finish. The builder has trimmed work forces and had to trim their profit margin on the building. This all adds up to a property that probably offers 10% more value than the same product purchase three or four years ago.
Add to that money leverage. Every one percent drop in interest rate increases a buyer’s buying power by 11%. Consider this crazy reality: the market has fallen in value 5% to 20% depending on neighborhood. It is fair to say in general terms that prices are about 8 to 10% less than they were two summers ago. Rates at that time were 6%. Rates today are as low as 4.5%. That means buyers have 25% MORE BUYING POWER than they did just two years ago.
Add to that the fact that buyers still control the market. A balanced market has 6 months of inventory: neither buyers nor sellers control the market at 6 months. Below six months, sellers control the market and appreciation is likely. Above six months, buyers control the market. Appreciation is less likely due to increased supply. Buyers correspondingly hold out for… MORE.
That “MORE” that buyers hold out for is critical. They are operating in a whole other realm of reality and possibility right now with 25% more buying power this summer than two summers ago. With that come heightened expectations. The first place that is made manifest is in the house itself. Yes, that lot might have value. Yes, that location might have value. But buyers simply will not tolerate: outdated carpet and paint; 80’s/90’s fixtures; lack of cleanliness; lack of snappy curb appeal; prices that are even slightly out of line.

Sure, it’s the Great Recession. But take one look at the Promenade Shops at Briargate parking lot any day of the week and you’d never know. New and New-On-Sale are today’s consumers two favorite categories.

Colorado Springs Real Estate Market Data March 2010

The Stat Pack is sizzling hot HERE.

Silver Bullets are good for killing werewolves. Not much else.

Save your silver bullets for John Landis movies...

Ask anyone in the real estate industry and they have a buyer who is sending them scared-stiff links that “prove” the real estate recovery is not happening like everyone says it is. Some gloomy desk-jockey-number-cruncher is usually quoted with a gloom and doom rubric “5 million more foreclosures” and “21% of American’s underwater” and “it’s now moving to prime mortgages.” The agent response to this phone call or email is usually just as incendiary… they sometimes reply with back issues of the Stat Pack as an attachment. Clashing gospels and dueling clanging gongs creates quite a racket.
The reality is that the economy is a giant gumbo of variables. Within 36 hours this week, all of the following were headlines: Colorado Jobs numbers much worse than expected; National Jobs numbers beat predictions; stock market near 18 month high; mortgage rates expected to rise as Treasuries stops buying servicing; mortgage rates at low for the calendar year; auto sales down 2%; retails sales unexpectedly up; nation’s consumer confidence goes down. Broncos have had a good week for free agents and the Rockies bench is looking pretty deep this year, too. All of these are true. None of these mean a thing on their own.
1.) Leverage: The most counter-intuitive aspect of the market, interest rates are staying below 5%. No analyst can say exactly why, everyone merely ventures a best guess. Most everyone is scratching their heads as to why they’re not going up. The Federal Government has been the wholesale market for treasury-backed securities, longhand for saying, they’ve bought the servicing rights on Fannie/Freddie mortgages for the better part of the last year. So if you’ve seen complaints about why the underwriting on mortgages got nutty, that’s a prominent clue as to why: the government put a trillion dollars of skin in the game on that one… Go figure they would prefer tighter appraisals. That treasury-backed securities practice has a budget that is probably out of gas around the first-of-April. After that… it’s back to the same private money that previously was buying servicing left-and-right up until mid-2008 when they saw the crisis about to break. The thinking on the street is that private money will be hesitant (to put it mildly) to buy servicing rights. Never mind that today’s mortgage has higher costs of origination, higher appraisal standards, higher consumer intelligence and 20 pages of additional disclosures attached to it making it one of the safest and best documented forms of paper wealth in America; these banks have been burned before and are expected to be either cautious or complete non-participants. The investment angle for banks is that they 1.) could make them a lot of money in the long-term based on the few players likely to play and 2.) make their shareholders jittery over the next 90 days and drive their stock value down in the short-term. Can you see the morass mortgages are? The bottomline: they’re low now! They may be going up, but they’ve rarely, in their American history, been lower (within 0.15% of the all-time bottom at this writing). Seasonal demand usually creeps them up in May and June anyhow, so a lock now is not a bad thing. Buying power right now (a.k.a. leverage) is almost unprecedented.
2.) Location: Where a home is greatly influences the value. Relocating buyers (#3 on this list) tend to prefer newer construction and so do the raised on Hi-Def & Wi-Fi generation of buyers. But values have held up well in the foothills. Year to date sales in some of the older areas have been abysmal. After a strong end to 2009, downtown has started off very weak. That might change as the more traditional downtown buyer begins to appear with the pedestrian-friendly, warmer months ahead. The months on market numbers vary wildly from neighborhood to neighborhood. Sellers, you can’t take chances if you have a year of inventory. No one’s going to pay near your price if that’s the case. Buyers… do you really want to buy where you’ll be surrounded by for-sale signs for another year?
3.) Relocation: the biggest drag on the Colorado Springs market has been the national market. Somewhere Else, USA used to be the friend of the Colorado Springs seller. The Pentagon-based Air Force Lt. Col. usually had made $100,000 in 3 years and sold their house with multiple offers. They could come west and buy pretty much whatever they wanted. With the onset of the market downturn nationwide in 2007, our market correction (which began in early 2006) deepened significantly. Reliant on the infusion of wealth from other markets, our over $350,000 market has suffered. Well strangely, of the 5 price-brackets to seen an increase in sales the last 90 days over the previous 90-day track (Nov. to Jan.), all of them were above $325,000. Some of that is local, but some of that is also the effect of other markets around the country having bottomed out as well, and their buyers are now able to buy here.
In closing, March 2010 dawns with more promise and hope then March, 2009. Hard not to. It remains a market of opportunity. Whenever there is opportunity, that means there is risk somewhere. Make your decisions wisely.

2009 End of Year Market Report

Updated Market Data

The 2009 Sales Year ended dramatically different than it began.

January was the depths of doom and gloom, lots of listings, lots of fear, skyrocketing job losses, Wall Street hemorrhaging.

Now, we’re back to worrying about Simon Cowel leaving Idol and “shocked” at the admission Mark McGwire used steroids. In other words, the economy is no longer a paramount concern.

But housing is. Last year, 62% of first-time buyers purchased a home because they had strong sentiments about home ownership. The good value rationale was sited as the number one reason among only one in ten respondents to the National Association of REALTOR’s Profile of Home Buyer’s and Sellers.

Locally, this bore itself out with a dramatic shift in the marketplace. The under $250,000 market improved throughout the year, while the $250,000 to $325,000 market made headway… and above $400,000, things actually got worse. Right now, 38% of all listings are over $300,000. Yet only 16% of all sales in 2009 were over $300,000.

Read more at Colorado Springs market leader in real estate information you can use, THE STAT PACK!

Where to Buy 2010, Part IV: Yellow Lights

In my recent post, Where to Buy 2010, Part II: Green Lights, I documented two dozen areas that were showing positive enough signs of life to conclude that:

  • Price Depreciation was likely over
  • Supply and Demand was weighted slightly in favor of Demand increasing (or better)
  • The probability of sale was increasing
  • Values would like begin increasing by the end of first quarter, 2010 (if they were not already actively appreciating)

Now comes the harder part. Offending people who live in places where these important stabilizing factors are less evident. These are “the Yellow Lights” areas where:

  • Price Depreciation may still be occurring
  • Supply and Demand is not clearly favoring an increase in demand and an over-supply may exist
  • The probability of sale is at the market average (47%) or worse
  • Prices may not start appreciating in first quarter 2010. It might take until late 2010 for that to happen

Very quickly, anyone who can read through my cautious language will notice “may”, “maybe” and “might” all dominate the language of this post. The Yellow Lights are areas where there can still be some excellent buys. But a smart buyer who wants in on one of these areas needs to quantify their decision making. Is the home I’m interested in below the median value for the area? Are there any fatal flaws that would possibly hinder appreciation (near or backing to a busy road, non-conforming floorplan, etc.). Am I buying upgrades or dirt? (because the dirt is where the value is)


These three areas all had one little glaring problem that kept them from Green Light Status.

OCC 2004 2005 2006 2007 2008 2009 Avg
Sold 186 216 199 149 109 122 164
Avg Price 169046 180837 171750 170945 152462 154462 166584
Expired/Failed 152 143 152 177 155 91 145
Total Units 338 359 351 326 264 213 309
Probability Sale 55% 60% 57% 46% 41% 57% 53%
Listed 58
Avg. List 220220
Tamarron 2004 2005 2006 2007 2008 2009 Avg
Sold 37 41 22 23 27 23 29
Avg Price 224281 240781 247860 263530 239940 228813 240868
Expired/Failed 17 9 19 22 19 20 18
Total Units 54 50 41 45 46 43 47
Probability Sale 69% 82% 54% 51% 59% 53% 62%
Listed 15
Avg. List 257420
Newport Heights 2004 2005 2006 2007 2008 2009 Avg
Sold 31 47 37 31 21 24 32
Avg Price 241980 265093 261895 296119 258056 246493 261606
Expired/Failed 31 14 22 21 17 10 19
Total Units 62 61 59 52 38 34 51
Probability Sale 50% 77% 63% 60% 55% 71% 62%
Listed 6
Avg. List 256933

In the Old Colorado City area, the probability of sale has increased and demand has picked up. But price has taken a beating every year since 2005. That’s odd that average price in this boutique and unique area started to drop two years ahead of other market. The consumer demand has been largely for less expensive properties. Qualifying the unique qualities of an over $200,000 home will be important for a 2010 buyer in Old Colorado City. Likewise, pricing has taken a hit in both Tamarron and Newport Heights. While the probability of sale has never dipped below 50%, it is interesting to note that surrounding areas have performed better.  When Tamarron (D20) is compared to Pinon Valley or Oak Valley Ranch (both D11), a larger, similarly priced property has had a lower chance of sale in the normally more appealing D20 area. Newport Heights average list price is actually below the 6 year average sold price. One difficulty here however is that the area is small and has many streets impacted by road noise (proximity to Dublin and Austin Bluffs). Homes on the inside and near open space will sell much more easily.

The, “These can’t possibly stay Yellow Light for Long” areas

Cheyenne Meadows 2004 2005 2006 2007 2008 2009 Avg
Sold 74 70 64 45 42 30 54
Avg Price 192149 204087 214987 211952 218016 209383 208429
Expired/Failed 31 22 28 30 48 35 32
Total Units 44 92 92 75 90 65 76
Probability Sale 64% 76% 70% 60% 47% 46% 64%
Listed 12
Avg. List 212041
Northgate 2004 2005 2006 2007 2008 2009 Avg
Sold 67 54 53 41 25 16 43
Avg Price 320870 382583 352463 333648 338654 344293 345419
Expired/Failed 23 30 28 39 33 23 29
Total Units 90 84 81 80 58 39 72
Probability Sale 74% 64% 65% 51% 43% 41% 59%
Listed 19
Avg. List 355089
Crystal Hills 2004 2005 2006 2007 2008 2009 Avg
Sold 15 18 25 12 20 18 18
Avg Price 280953 308650 345796 336833 315120 337027 320730
Expired/Failed 4 6 11 19 17 19 13
Total Units 19 24 36 31 37 37 31
Probability Sale 79% 75% 69% 39% 54% 49% 59%
Listed 14
Avg. List 346792

I was scratching my head looking at Cheyenne Meadows. That’s right up next to Ft. Carson and an always popular area with junior officers. With an average sales price similar to the city and high rental rates, this can’t possibly stay down long. But the probability of sale is lousy and price has reset to 2004 levels. Weird. Very similar circumstances north of New Life in Northgate (collectively Trailridge and Deer Creek). Prices are at the 6-year average and the probability of sale has been low for four years running. This despite a superb location and near many of the destination D20 schools. Then there is Crystal Hills. The only suburban-style neighborhood in Manitou, the problems here are a lower than expected probability of sale and higher than usual inventory. With the price reset to the six year average and an over-supply heading into winter, pressure is down on price (for the short-term). All three of these areas have something somewhat extraordinary to extremely special in their location. That will have to make a measurable impact on a return to better value sometime in 2010.

High-End Areas where the worst is probably over (but boy what a hit)

Mountain Shadows and Peregrine have both seen demand sour substantially in 2009. At one point in October of this year, Mountain Shadows had only 3 properties that had sold for over $400,000 the entire calendar year. For a long stretch of the summer, a half dozen Peregrine properties were in a race to the bottom in price, starting around $650,000 before settling between $575,000 and $615,000. And for the last several years, the Old North End has been characterized by very low demand over $500,000.

Mountain Shadows 2004 2005 2006 2007 2008 2009 Avg
Sold 77 87 74 48 57 44 65
Avg Price 323627 356627 374161 381103 378998 332717 357872
Expired/Failed 42 25 37 71 46 52 46
Total Units 119 112 111 119 103 96 110
Probability Sale 65% 78% 67% 40% 55% 46% 59%
Listed 26
Avg. List 440203
Peregrine 2004 2005 2006 2007 2008 2009 Avg
Sold 53 65 73 56 38 22 51
Avg Price 445883 520341 573800 528103 526349 471336 510969
Expired/Failed 34 25 32 41 37 44 36
Total Units 44 90 105 97 75 66 80
Probability Sale 64% 72% 70% 58% 51% 33% 64%
Listed 30
Avg. List 561746
Old North End 2004 2005 2006 2007 2008 2009 Avg
Sold 42 54 56 46 41 20 43
Avg Price 352358 376357 430213 406895 400573 384725 391854
Expired/Failed 40 28 34 27 30 25 31
Total Units 82 82 90 73 71 45 74
Probability Sale 51% 66% 62% 63% 58% 44% 58%
Listed 33
Avg. List 769969

In all three of these areas, the average list price remains above the six year average. But the year to date sales price has dropped below the six-year average. In all of these areas, a home under $500,000 is very much worth looking at. Homes asking over $650,000 though will have to offer the buyer something extraordinary. That is, until inventory levels shrink even more.

The Million-Dollar Drag

Pine Creek. Spires. Flying Horse. All of them have taken a beating with direct competition with new construction. All of them have a lot of inventory sitting on the market. All of them have a lower than expected probability of sale. Broadmoor Glen has the added nuance of present new construction that is starting at twice the average of the rest of the neighborhood.

Pine Creek 2004 2005 2006 2007 2008 2009 Avg
Sold 102 97 107 96 63 48 86
Avg Price 412235 456217 491999 491366 468159 429007 458164
Expired/Failed 56 59 61 93 81 82 72
Total Units 158 156 168 189 144 130 158
Probability Sale 65% 62% 64% 51% 44% 37% 54%
Listed 36
Avg. List 667759
Spires/B Bluffs 2004 2005 2006 2007 2008 2009 Avg
Sold 108 87 68 98 50 44 76
Avg Price 551509 575448 586949 579556 580599 520501 565760
Expired/Failed 58 47 65 85 85 69 68
Total Units 44 134 133 183 135 113 124
Probability Sale 64% 65% 51% 54% 37% 39% 61%
Listed 50
Avg. List 776643
Broadmoor Glen 2004 2005 2006 2007 2008 2009 Avg
Sold 32 24 18 19 17 11 20
Avg Price 340134 358016 392818 392647 452308 582500 419737
Expired/Failed 5 7 10 14 21 16 12
Total Units 37 31 28 33 38 27 32
Probability Sale 86% 77% 64% 58% 45% 41% 62%
Listed 8
Avg. List 602100
Flying Horse 2004 2005 2006 2007 2008 2009 Avg
Sold 16 57 48 36 32 38
Avg Price 491533 490972 491940 448718 417985 468230
Expired/Failed 2 13 44 61 38 32
Total Units 18 70 92 97 70 69
Probability Sale 89% 81% 52% 37% 46% 54%
Listed 34
Avg. List 912304

In all four areas, the “average” property for sale requires not just jumbo financing, but super jumbo financing or a cash buyer. There are not many of either. Since all three areas have homes from $400,000 to well over a million, even talking about them as “areas” requires a discussion of areas within areas. A home on the Golf Course in Pine Creek with a nice lot and great upgrades will probably sell at a respectable price. A home that isn’t on Paisely (where it seems everything is for sale near the top) and is in the low $600,000’s will likely sell in the Spires. In Broadmoor Glen homes can move very quickly… or take forever. The price span is largest here, with home starting around $300,000 (selling very well) and an over-supply of million dollar new construction in the Canyons (one to three units selling per year). Flying Horse is having a hard time selling anywhere north of $500,000, but under $450,000 is actually moving faster than 6 months. In all three areas, the bottom of the neighborhood in price seems to be activated; but the majority of the present listings are quite a bit more than “average”. These will take a year or more to see improvements.

The operative term here is “Yellow Light”. Many drivers see yellow light and hit the accelerator. That means change is about to happen, and if they act quickly, they can beat the change. That might be the case in some of these places. The safe money is found in the Green Lights. The Curve-Beating money is found when the light is yellow.

Where to Buy in 2010: Part II, Green Lights

Where to Buy in 2010 is a complicated affair. The buyer has so much chatter to sift through, so many conflicting opinions, and so much emotion to manage, that while it is a great opportunity, it is also fraught with peril and possible future disaster.

To be clear: it is a good time to buy. But it is a good time to buy IF a buyer is wiling to set aside priorities of shiny and new and instead, buy into a neighborhood.

Rather than rank neighborhoods or get too complicated with a convoluted metric that only makes sense to a statistical geek like myself, I have color-coded 44 neighborhoods in to easy-to-associate categories: Green Light. Yellow Light. Red Light. The data I used to come to these opinions involved analyzing and comparing these neighborhoods over each of the last six years, calculating the marketplace average for that time span for sake of comparison, and then plotting that against the present-day active market conditions. I looked at units sold, units that failed to sell, the average selling price, the probability of sale and what today’s total active units and average sale price looked like. A neighborhood that exceeded a 50% chance of sale over each of the last 6 years was unusual. A neighborhood that was selling above the 6 year average in 2009 was also notable. A neighborhood that had high unit sales, scarce active listings, a high probability of sale and a geographically desirable location proved to be an overall market leader.

A nearby neighborhood at a higher dollar figure with an increased probability of sale but a 20% drop from peak average value and a location that made it’s future demand questionable got the Yellow Light. An area associated with million dollar properties but an average sales price in the $700,000’s and less than a 20% chance of sale this year… that was a pretty easy Red Light.

Within any of these areas, there are homes and pieces of dirt that are exceptional and valuable in the long-term. This is a study of how actual neighborhoods are doing, not individual properties. It is very apparent that dirt matters. It is also apparent that there are notable market improvements throughout Colorado Springs. Of the 44 neighborhoods researched, green lights were awarded to exactly half (22).

Lastly, before showcasing the performance of these areas, this project is not complete. As usual, I bit off more than I could chew… or at least chew and digest. I need to add at least a dozen different neighborhoods in the coming weeks to include multiple parts of Monument, the East-Side, the Southeast Side and Fountain. Right now I am showcasing the information for the areas where I personally show or preview almost every month, and definitely make an appearance every quarter. There are other neighborhoods in town that have made spectacular improvements on the city’s east and south sides; and there are parts of Monument where demand has disappeared almost completely. This data will take longer to process, but will be treated with the same value association.

So without further ado: Where to Buy 2010

Green Light:

Sundown, Nor’wood, Oak Valley Ranch, Pinon Valley, Fairfax, Gatehouse, Sable Chase/Misty Meadows and Meadow Ridge/Contrails are the market leaders. These are areas in northeastern and northwestern Colorado Springs that have endured the market setbacks with consistent popularity and surprising value resilience. Every area has enjoyed a better than 60% probability of sale year to date and typically enjoys a better than 64% chance of sale over the last six years. The market average year to date is around 46% and has been less than 50% for each of the last three years. Prices suffered in each of these areas between November and March of last year due to bank-owned properties slamming the marketplace. Buyers gobbled these up quickly, frequently in bidding wars. Values plunged almost 10% in less than 2 quarters. The resiliency of these areas is all proven in the fact that they are all rebounding in price to nearly the same point as they were at the end of 3rd quarter 2008.

Among the newer areas, Stetson Hills/Ridgeview and Cordera are very solid value propositions. Stetson Hills has posted more units sold than any other neighborhood in each of the last six years. It is a huge area and I have some reservations about lumping it as a single area. But it tends to rise and fall as a singular entity. Presently, the average price stands above the six-year average. Over 300 units will probably close this year, behind only 2004 and 2005. Cordera is a real surprise. A record number of units have sold this year already and prices have been stable throughout the four-year history. It also boasts a 65% probability of sale. Apparently the master plan and collection of builders is finding fans in the buyer community.

Additional neighborhoods that get the Green Light include Mesa Heights/Pleasant Valley, Downtown (Patty Jewett & Divine Redeemer), Wagon Trails and Vista Grande. These areas have been less resilient to price fluctuations and have a lower probability of sale, but still have certain factors that show price appreciation in 2010 is likely. In Pleasant Valley, the average year to date sales price is still above the six-year average and the probability of sale has varied no more than 6% over the last half decade, varying from 64% to 70%. The only reason this is not an all-star is because there is a slight over-supply of housing with 15 units presently for sale, when only 22 have sold this year. Vista Grande is priced below 2004 values but has only 16 houses for sale. Such scarcity against the demand of 59 year to date sales says that sellers can probably stop worrying about depreciation. The average asking price is 40% higher than the year to date sales price, so if a buyer is looking under $180,000, they’re probably buying very well in Vista Grande. Wagon Trails has started to return from the big 2008 foreclosure crunch. Thirty units may sound like a lot for sale, but considering that this neighborhood sold more than 190 units in both 2004 and 2005, that is a very low supply for an always popular area. Prices have taken a hit downtown in terms of what has sold, but the asking prices show that there is still some resilience. With supply and demand heading back to a direction that favors sellers, downtown should experience an additional pick-up in activity in 2010.

Wolf Ranch and Pinecliff are two Green Light surprises. Wolf Ranch probably suffered more from the market meltdown than any other sizable neighborhood. In 2007, the average sales price dropped almost 10%, and then 2008 saw three national builders leave the market (John Laing went bankrupt) and foreclosures swept across the area. But prices have stabilized which is very unusual for a market in the mid-$300,000’s and the probability of sale has increased to over 50% which is also unusual for the pricepoint. Pinecliff has taken a beating this year in price, but that is primarily due to a value-enhancing quality: there is very scarce inventory. What has been on the market in 2009 has generally been below-average in terms of price. Only 13 units have sold this year (peak was 27 in 2007), but there are only 7 for sale (this is a 440 unit neighborhood). This is characteristic of a marketplace where sellers with equity have simply waited out the market not wanting to compromise their investments.  The higher end properties will probably start selling once more units come on the market and buyers begin looking at three to four homes in the area rather than one or two here, and ten somewhere else.

Briargate hosts two areas where buyers can probably scoop up a pretty good bargain: Wedgewood and Summerfield. Both of these areas have averaged a 70% probability of sale in the last six years but have stumbled in 2009. That means they have sellers who probably are ready to unload their houses in an area that is typically a magnet for relocation traffic (which is a big part of why they have stumbled in 2009: relocation is off tremendously from the 2006 peak).

Neighborhoods that just squeaked in on the Green Light are Old Farm, Skyway, Rockrimmon and Springs Ranch. In each of these areas, the prices that are selling are well-below the average sold price and the peak. But the probability of sale is visibly increasing. Since all three areas have pockets of higher end properties interspersed with properties at or even below the market average, they deserve attention from savvy buyers looking for long-term investments. A caveat is that in all three areas, the present listing supply is generally leftovers from the summer season. These may move up the list by 2nd quarter 2010. Springs Ranch has not performed nearly as well as it’s northern neighbor Stetson Hills over the last three years. The bigger concern is that there are still 54 units for sale. Properties take longer to sell here and while the probability of sale has increased, there is not the supply:demand ratio swing that shows definite price growth now. It looks likely in 2010, but has not yet materialized. The probability of sale has increased in 2009 from 47% to 64%. This was in part due to sellers getting more realistic with lower prices.

Finally, a handful of neighborhoods that rate as near-misses. These are interestingly all Higher End areas… and Old Colorado City. These are yellow light areas for a fairly uniform reason. Flying Horse, Pine Creek, Mountain Shadows and Broadmoor Bluffs/Spires are all known for higher value homes than their 2009 average sales price. The 2009 average sales price is well below the 6-year average in each of these areas. But almost without fail, where the inventory problem lies in these areas is in units that are well-above the six-year price average, and often well-above the market-peak for average price seen in 2006 and 2007. Strangely… Old Colorado City has the same problem. OCC is really a $200,000 area, but the average sales price stands at $154,000 for the year. When the median on-the-market asking price is 35% higher than the year to date average sales price… something still is not right. These are some of the Yellow Light Properties, where green shoots are beginning but improvements are yet to get rolling but should begin by 2nd quarter, 2010. More on these tomorrow.

Where to Buy in 2010: Part I

I have a lot of buyers looking to make a purchase in the next 12 months. Many of these buyers are relocating into the area. This is a promising sign for overall market recovery.

It also is testing my mettle in helping them choose an area to focus their search. Buyers have no problem rattling off a list of what they want in a home. It gets a lot fuzzier when they are challenged to think about where they want their home. Case in point:

I tell every seller this nugget of wisdom: Buyers have three concerns that we must market your home to. 1.) No buyer wants to pay too much for a home. 2.) All buyers are afraid something is wrong with the home. 3.) What if someone else gets the home? Fear 1 and Fear 2 CAN be controlled by a good listing agent. A properly priced home in-line with consumer expectations will get traffic. A well-staged and inspected home will overcome the fear of something being wrong with it. That places a buyer in the position of “what if someone else gets the home?”

I’ll admit, as a REALTOR, I like to sell in the areas that have more “what if someone else gets the home?” properties. This is not because I like inflicting psychological terror upon my buyers (it is fun, though!). It is because these are the properties that are more likely to appreciate, stand the test of time, and are in the “interesting” parts of town that are so unique to El Paso County.

There’s a temptation to think that “when the market comes back” that the old rules will apply. This tempting thought seems to extend out to properties rising in value, buyers preferring more house when they can get it, that more financing rather than smarter financing is all going to occur. To some of that, I say yes… properties will eventually start to rise in value by 4 and 7% a year, and buyers as they move “up” in life will probably want more, not less square footage, and there is a time and place for 10% secondary financing.

But who really believes that 40% of all home sales should be non-owner occupied units? Who thinks that it is a sign of a healthy market when the national residential renting rate is 11%… but 28% of all single family units sold were purchased as “investment property”? Can you find that missing 17% of the population who is supposed to “rent” these properties? These were the market conditions in the 3rd and 4th quarters of 2006. If you really uncork the math on that, inside that 40% number is a really terrifying number: 12% of all units sold were not even investment properties but “2nd homes”. And Nicolas Cage didn’t go on his buying binge until 2007. The raw aspects of that freakish lending means that one in eight people buying a house in 3rd or 4th quarter 2006 – nationwide –  did not have to show sufficient income to offset the cost of ownership. This would involve everything from a beach house on Anini Beach to a condo in Breckenridge to a patio home in Flying Horse to a high-rise condo in South Beach… maybe the latter two were acquired with the intention of the persistent run-up in new construction values, a builder-leveraged flip if you will. But 12% of the homes purchased quarter 3 and quarter 4 were purchased with the lender acknowledging… no one is planning on occupying this residence. Folks… those were the good old days. Return to that?

Yes, this is all the product of the Lehman Brothers subprime financing and we all know that these loans don’t exist anymore. Does that make the market safer? Does that make the market less prone to subprime thinking?

The answer to both, is no. Here is the advice of a CNBC commentator on how we ought to deal with our economic recovery. Who exactly does this benefit? How and where are the jobs being created? I mean, outside of the mortgage shops? The answer is more debt, re-fi’s to people upside down and greater negative liquidity?

If the idea of “greater negative liquidity” sounds like a bad idea, than would it not be wise to dial in on properties where the threat of “greater negative liquidity” is lower? Similarly, it seems to make sense that properties that encourage “greater positive liquidity” would be wise. Real Estate has a handy solution: the dirt matters.

Buyers are always attracted to the shiny and new. Apple is a great example of this. People will pay for style. If they did not, Apple would not exist. Apple World would not be the can’t miss event it is. The reality is, my MacBook Pro is heading on year three and just had it’s first major service: it needed a new battery because I exhausted the old one. The remarkable computing device just keeps plugging and multi-tasking and tweeting and I’m all the more efficient for it. There is no engineered obsolescence on this machine like there is inside my piece of junk desktop. Replacing my Mac would be foolhardy. The value is built right in and it is still there today. Yeah, it still looks good, but the functional value supersedes the style. What I bought then still works today.

This is directly similar to the 2010 Colorado Springs Real Estate Landscape. Buyers in 2010 have the opportunity to buy something now that will still work out well for them in three years, six years, 15 years. The common denominator is dirt.

Just as I have a computing tool in my possession that lets be more effective and more efficient, buyers in 2010 will have a landscape that is akin to a gambler’s dream: they can buy with the benefit of history on their side. Compare the November 1, 2002 market to the November 1, 2009 marketplace:

2002        2009

Active Listings               4218         4453

Sold October Units        756           773

Avg. Sales Price         $209,108 $213,352

Interest Rate                   5.88%     4.88%

The numbers look like a 2002 reset. The reality is that home values are really somewhere between 2000 and 2005 depending on the area and type of property (condos and townhomes have fallen faster and farther than single-family). The supply and demand ratios are extremely similar. The November, 2002 stats reflect a market right before the big wave of demand struck the marketplace. These conditions helped catalyze the four year run up in value (because our demand was somewhat strong and inventory high however, they also acted as a deterrent to the astronomical run-up more common in coastal markets). The number that stands out like a soar thumb: the present buying power a buyer enjoys at today’s near-record low interest rates give them the ability to buy 11% more property. Or better said… they can buy with 11% more affordability than they could in 2002. And do so with the power of knowledge that the city looks very different today than it did than.

Pinecliff is 11 minutes from downtown, offering 5400 square feet under $500K with D20 schools

That “foresight knowledge” of seven year’s of city growth is the really valuable commodity. Since 2002, 26,000 single family homes have been constructed. That’s approximately 30% of Fountain and Falcon, a large chunk of Pine Creek, all of Cordera and Wolf Ranch, Banning-Lewis, Stonecliff in the Spires, Cathedral Pines, half of High Forest Ranch, half of Jackson Creek and quite a bit of Monument. These places did not exist 7 years ago. They do now.

That means that a buyer now can actually see the city, not the master plan. Will there be views? Sort of. How are the roads? What are the commute times? Will there be a fire station? Where are the schools? Are they any good? Rather than rely on theory, they can go check out in person each of these key data-points. That means that a buyer can see and feel and touch and appreciate the historical ramifications of good buying decisions… and bad ones.

Within this marketplace there are enormous curves in supply and demand. High Forest Ranch for instance only has a year of inventory to sell through right now. That is similar to Flying Horse. Yet High Forest Ranch is an $800,000 neighborhood and for all their attempts to be uber-luxury, Flying Horse is really a $500,000 area so far. To have a year of inventory in 2009 is remarkable… that’s similar to what an $800,000 area enjoyed in the market boom year of 2005. When supply and demand approach balance, values cease declining and the ability to define a remarkable home on a remarkable parcel increases.

Tactically speaking, buying a home that is newer, with modern flair and “nothing wrong with it” is a good idea.

Strategically speaking, where such a home exists matters infinitely more. Right now there are areas in-balance, seeking balance and wildly out-of-balance. This week we will explore the markets in-balance. Next week, the markets seeking balance. After that: the markets that are still in trouble.