Colorado Springs Real Estate Stats for June 2008

The market is on a pace to be down 39% in units from the 2005 peak. At the present sales rate for the year, there will be somewhere around 8000 transactions and an average price point roughly the same as the end of December, 2005.

Believe it or not, that's good news and possibly the envy of most markets in the United States. May produced a staggeringly small number of closed transactions at 840 units. Yet possibly bigger news was the reversal of year-over year listing supply: for the first time since September 2005, there were fewer homes to choose from then the same time the year before. The 150 listing difference was a 2% dip from May, 2007. The average price point that had been dropping in freefall fashion in early 2008 has rebounded $25,000 from the February low to a modest $251,543. The median has rebounded to a place similar to the end of Summer, 2007. For the eleventh month out of 14 previous, the market has seen fewer listings added to supply, and while the sales volume was off 18.6% (not good at all), the listing volume was off 19.9% when compared to the previous year.

Right now the average sales price lags the May 2007 by a full $16,000. Appraisers, mortgage insurers and underwriters are labeling several portions of Colorado Springs as a "declining market". But interestingly, online property-value web services like Zillow are characterizing the Colorado Springs market in a light that is even more favorable than the data provided by the Pikes Peak Association of REALTORS. The reality is that different houses are selling in 2008 than in 2007. In 2007, there were sales in the Jumbo category, because properties could be purchased with jumbo loans at rates similar to conforming loans and downpayments could be made up with secondary financing (10%, 15% and even 20% second loans). The reality was that for $30,000, a buyer could get into a $600,000 home in 2007. That buyer can't do that in 2008. If they only have $120,000, they can expect to pay 8% for a 30-year fixed jumbo loan. If they have $183,000, they can scratch back into conforming loans, where the rates are still around 6%. As far as secondary financing: most loan investors won't allow them, and quite a few of the secondary companies are gone completely, shuttered fall out from the mortgage mess.

What has happened in the last 90 days that is encouraging is that some of the high end has started to sell. In some way, shape or form, the market went from a five-year supply of over $500,000 homes to a two-year supply between February and the end of May. Part of the reason is that high-end buyers are willing to take some risk: they are willing to finance their properties with Jumbo ARMS, obtaining interest rates that are on par or lower than the 30-year fixed conforming rates (5.3 to 5.8% for 5 and 7 year Jumbo ARMS in the last 30 days). By doing this, they are expressing two things: they want to buy; they are confident enough in the market that they believe in time values will improve or they will see Jumbo reform allowing them to refinance into a more appropriate loan. This is one of the variables that is new, and is starting to influence the market.

On the other end of the spectrum are the declining market appraisals. Conventional financing usually requires a 3% buyer downpayment. If a market is registered as declining market, it may require an 8 or 10% downpayment. Only adding to the confusion, not all lenders are calling the same zip codes declining markets. Lender A may call Zip Code 1 a declining market, either due to the conservative values of their investors or their portfolio of originated loans heavy exposure to foreclosures here or other markets. But Lender B may call the same Zip Code 1 a conforming market, either due to their aggressive tendencies to continue loan originations or simply, they have a low exposure to foreclosures here or elsewhere. As a Buyer, make a quality decision as to who your lender is. Your lender could literally choose your zip code right now if you're not careful. As a seller, pay attention to your neighbors and what paper thatloan pre-approval is written on. Colorado Springs and El Paso County was one of the last areas in Colorado that saw declining market registrations and it may be one of the first to crawl out of this stigma. But for now, almost any zip code could be effected. Beware.

The market is at the bottom. The next nine months will likely see incremental market improvements. The market will not likely max out at 7065 single family homes as it did last year, but it may hit around 6800 in the next couple months. Buyers will continue to march up in price for the next few months as fewer quality listings come on the market and buyers choose to bring the price reduction to sellers by negotiating deals on more expensive properties. But a wholesale market flip seems unlikely in 2008. The fundamental characteristic will be that buyers hold most of the cards.

Advice for SELLERS:

It's a Race. There may not be many 2nd place ribbons handed out this year. In cold, simple terms you need to be in touch with the rate of sale for your immediate area. If it is selling at one unit a month, don't price yourself versus the past: school starts in 60 days. Eight out of Ten homes selling this year are under $300,000. The buying demographic is family-centric. The time to do a deal is between now and July 31st.

BUYERS:

We've said it before for different reasons, we'll say it again for a bigger reason: CHOSE YOUR LENDER WISELY. Will your lender's past loans influence your buying decision? Maybe. Will your lender provide you with 90 days of rate security? They seem to change by the hour. Will your lender close on time? Has your lender created a nightmare recently for the listing agent on the property you wish to buy? It is in your fiduciary interest to evaluate all these concerns just as you would evaluate a good faith estimate of closing costs.

INVESTORS:

Do you think a soldier deployed to Fort Carson is more likely to rent or to buy? It is the best buyer's market in 15 years, yet the average soldier has been deployed more than twice. Rental properties south of Constitution are scarce. Vacancy rates in apartments are less than 10%. See a pattern?