Colorado Springs Real Estate Blog

THE RULES:
There are many rules in a fluid real estate market, but here are a few that we believe hold true IN ANY MARKET (one favoring buyers; one favoring sellers; it does not matter):

•LOCATION, LOCATION, LOCATION
•MONEY IS MADE ON THE BUY
•SELLERS SET ASKING PRICES; BUYERS DETERMINE VALUE
•BUYERS BUY VALUE
•CONTINGENCIES CLOUD NEGOTIATIONS (THE MORE “IFS” THE FEWER DOLLARS)
•THE HARDEST THING TO GAIN IS TRUST; THE EASIEST THING TO LOSE IS TRUST
•REPUTATION AND ETHICS ARE VALUE-ENHANCING ATTRIBUTES
•A HOUSE HAS DIFFERENT VALUES FOR DIFFERENT BUYERS: BUYER A CAN BUY HOUSE X FOR LESS THAN BUYER B

DISCUSSION:
Springtime in the Rockies where April Showers bring May Snows…
Stabilizing trends are evident amidst the usual spring tumult. As Relocation Season shifts into high gear, lots of homes come on the market and some of them sell. In the last calendar year, less than half the homes put on the market (20,705 single family listings 2007) actually sold (9995 sales in 2007). In the last three months, that ratio has increased a little more than 10% as 53% of the listings put on the market from February through April sold (3833 listed, 2042 sold 2/1/08 through 4/30/08). Only a spin doctor would call this a landmark improvement. It is however an indicator of the wholesale market-slump moderating. Other indicators: At this time last year there were 6052 single family homes for sale; right now there are 6175, a 2% difference. One of the major misconceptions of the marketplace is that the market moved into a heavy listing pattern in 2006. The reality is that it moved into a heavy listing pattern in mid- 2004: demand kept up with supply through 2005. Supply tailed off in late Spring, 2006 and the heavy listing forces kept on chugging.
However, the listing stimulus now appears gassed: only three of the previous 15 months have seen more year-over-year listings in a calendar month, and it appears likely that around Memorial Day the active inventory in 2008 will dip below the active inventory from the same time in 2007. Again, it’s not a statement or declaration of the market “having changed”. It is instead, another indication of the market “changing.”

Year to date, 80% of the properties sold, sold for less than $300,000. If there is a drag on the overall “average values” and median value of Colorado Springs property, it’s the fact that the market is so top heavy with expensive listings and little financing to purchase those properties. Correspondingly, the median value is lower because it is a measuring stick of only the properties that are moving, and four out of five are less than $300,000. Some interesting numbers are at work in the under $300,000 market… There is presently a 6.8 month supply of housing under $300K. That’s still a long 200-day window that the average property will need to sit through in order to sell, but the National Association of REALTORS defines an “even-market” where neither the buyer nor the seller has the advantage as a 6 month market (180 days). The price range of $150,000 to $250,000 accounts for 45% of all sales activity year to date (as well as the median and average prices for our market) and the story is similar in this, “the bread and butter” of the market, a 7-month supply of inventory. April saw a 9.8% decrease in listing inventory over 2007, and while sales were down 13.6% from 2007 (that isn’t positive), April had seen little to no gain over March sales in either 2006 or 2007. This year it was up 7%. Crawl. Walk. Run. The market is right now crawling. That’s a compliment based on perspective, because in January and February it was laying on it’s back, battered and beat up. But right now, it is starting to crawl.

SELLERS Supply is Slowing. Demand hasn’t picked up yet. Don’t take chances. Now more than ever is the time to strike if you are a seller. The market is not exactly heating up, but there are some favorable trends. Get your yard looking better than any other on the block. Address your paint. Prune your shrubs. Get the inside smelling fresh and clean (Glade Air Fresheners are not nice and clean smelling). Clean the furnace, don’t wait for the inspector to kill the deal. As relo season begins, condition matters, and relo buyers increasingly are anxious to get in and get a good buy. With 72 hours to pick a house, they’ll only buy good value homes that are tidy and ready for move-in.

BUYERS: Use this information to your advantage. Supply is slowing down. Colorado Springs will not likely have 7000 single family choices this summer. That means the maximum inventory will occur by mid-summer. Ask yourself this: “if supply is slowing down, is that a good thing for my future values? If demand is still low, is that a good thing for my negotiating strategy? How many more times will I see a 6% 30-year fixed rate? How often will I see a seller so willing to pay my closing costs?” Buyers: DON’T BLINK. July and August may not be so favorable.

INVESTORS: If you’ve been waiting in the wings for the market to recover, start looking in your rearview mirror. What do you see? See any good deals from the last year you might have missed? Like Buyers, Investors need to ask questions that are not focused on the next 90 days, but the next 3 to 4 years. While the rest of the mortgage world has reset to 1999 underwriting rules, one place it hasn’t changed is investor rates at or near primary occupant values. Some of the best deals in years are out there now, and relocation buyers who are starting to flood the market often can’t waste their time with them. They want move-in condition. A long-on-market property needing a bit of work ($5000), is usually not a move-in property for a relocating buyer who needs every dollar to go towards their down-payment now that 100% finance is gone for anyone but a VA buyer. That means that the local investor buyer who has cash, 10% minimum, 20 to 25% better, has a ton of power. A classic rule of negotiating: those with needs have little power. Those with power have few needs.

May 2008 SWOT Analysis