Tag Archives: Real Estate Values

How ya gonna do? Our 2013 Predictions in Preview

It’s up.

It’s live.

It’s 12 pages of dancing caterpillars, plus pictures of our children, scenic Colorado landscapes and local art.

It’s the 2013 Annual Report & Forecast: Green Shoots.Our 2013 Annual Report & Forecast

Our 2013 Annual Report & Forecast

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.