For the last several years (2012 onward) real estate has returned to health in the Pikes Peak Region. Steady appreciation has become both the norm and the consumer expectation all along the Front Range. Denver, Boulder, Ft. Collins, Douglas County and Summit County have seen several years with double-digit appreciation since 2013. Correspondingly, the Denver Metro area has joined the ranks of America’s high-cost cities with an end-of-year 2017 average sales price of $480,000.
Meanwhile to the south, El Paso and Teller County have seen a similar short-supply of housing, record buyer demand, similarly low unemployment numbers, similarly large inbound-migration and a paucity of new building starts. But mysteriously for the previous four sales years, average price here has been growing at a much slower rate, gaining an average of 5.6% annually from 2012 to 2016, with the “big year” being 2015’s 6.8% growth.
This past sales year was when that changed; 2017 saw an average sales price bounce of 9.9%. Median prices were also up a healthy 9%.
This notable gain came due to a perfect storm of price-enhancing factors:
- We anticipated buyer demand to be nearly-as strong in 2017 as it was in 2016. But we didn’t expect it to eclipse the record 2016 performance. It did. Sales in 2017 broke the already staggering record of 15,000+ single-family units by 6.7% at 16,132 units. The continued big demand allowed sellers to price higher, and get their price.
- We anticipated more listings would come to market in 2017 (we predicted 19,000 and there were 18,450). We were right, this was an increase in listings, but they were simply gobbled up by buyers. In 2017, for every 100 homes that listed, 88 sold! Wanna-sell sellers couldn’t sell because they didn’t know where they would buy. Therefore, this vicious cycle of too-little inventory in some cases robbed sellers of the opportunity to buy for themselves. Sure, they could sell their house, but buy what and at what price? The supply of housing “peaked” in July at a meager 2366 units. That same month, 1646 units closed. Compare 2366 units to the falling-apart market ten years prior: in July 2007 there were 7065 single-family units for sale (and approximately 100,000 fewer people in the metro area). That’s almost exactly 3x the number of listings for sale. In July 2007, only 1031 units closed.
- We anticipated interest rates to climb in 2017. They did, but only a little bit. The year ended with a much lower than expected average interest rate, and for the year, the average rate was just under 4% for a 30-year fixed rate.
- All of this fell against the back drop of an improving national economy, 20% gains in the S&P 500, a Colorado Economy with a statewide unemployment rate of less than 3% and the expense of Denver pushing people further and further south into the extreme ex-urbs known as Monument and Colorado Springs.
The last two years have seen a major psychological shift in perception regarding Colorado Springs pricing. What was historically perceived as affordable has quite quickly become “it seems like everything is expensive.” When speaking of shifts of perception, there is the perception that sellers have of their asset, their home; then there is the more salient perception, that of buyers, who are making a statement about their belief in the future when they buy. For purposes of market activity, it’s the perception of buyers that matter most: without buyers, there is no exchange of properties. The graph above takes into account what the normal buyer has “experienced” the last two years when they’ve searched for property on Zillow or Realtor.com. If it has seemed like there were only expensive houses for sale… it’s because there were only expensive houses for sale! Take a look at Spring 2016 when the average asking price lunged upward. While 2017 ended with the average sales price at $314,000, the average asking price for the 1350 remaining listings for-sale was a staggering $546,000. Yes, new-to-market listings were $345,000 on average most months; but homes on average were selling in 30 years most months of 2017. So the only ones “left” in buyers’ searches were often the more expensive half-million plus properties.
Correspondingly, the price-point buyers were willing to buy at in 2017 was very different than in 2016. As the orange detail notes above, in 2016 23% of all single-family sales were $200,000 or less. In 2017 under $200,000 single-family sales were under 13%. That’s the difference between nearly one in every four sales being under $200,000 one year, and the next year, only one in eight. That’s an extreme stress on buyers at the entry point in the market. In both 2016 and 2017 45% of all sales were between $200,000 and $300,000. Over $100,000, the percentage was the same; but in 2016, 56% of the sales in that $100,000 price range were between $200,000 and $250,000. In 2017, exactly half were less than $250,000 and half were more than $250,000.
The market expanded at all higher price ranges, with both a larger number of units closing and a larger percentage of sales over the previous year. These larger-value sales included out-size gains in the million-dollar market.
Previously, 2007 was the year with the highest number of MLS million-dollar sales at 67 units. The 2017 sales year broke past that past success with 78 sales, but in a much-greater diversity of MLS areas. Especially notable was the increase in high-end sales on the north end of El Paso County. The 80906 zip code in southwestern El Paso County is home of the Broadmoor, and year after year, 80906 is a consistent bellwether of million-plus activity. But in 2017, sales in Academy School District 20 on the north increased to 18 units (there were 25 in Cheyenne Mountain District 12). Counting Lewis-Palmer District 38 in the mix and all the sales in Black Forest, 80908, the northern part of the county matched the southern part of the county at 25 million-dollar units a piece.
After years of steady price growth, the reality that Colorado Springs has grown into an area where homeowners who buy and hold stand to make a nice return on their investment is proven when sales over the last seven sales years are examined. In this time, the average price has increased from $217,819 in 2011 to $314,589 in 2017. That’s just under $97,000 in increase for “the average home” in the Pikes Peak Region.
So what does this mean for 2018? Will prices grow another 10% in 2018 (which would mean that the average price in The Pikes Peak Region would be $345,000 by January 2019)? Stay tuned as we continue to unpack the data from the biggest year ever in local real estate.
Based on information from the Pikes Peak REALTOR Services Corp. (“RSC”), for the period January 1, 2011 through December 31, 2017. 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.
Additional data for our Annual Report Series provided by Colorado Springs Home Builder’s Association, Pikes Peak Regional Building Dept., The Gazette, The Denver Post, www.FHFA.gov, www.HUD.gov, www.Zillow.com, Fannie Mae, Freddie Mac, Colorado Springs Business Journal, Mortgage Bankers Association, www.Census.gov, www.SpringsGov.com, www.ElPasoCo.com, www.cospringstrails.com, www.bea.gov, www.city-data.com, www.corelogic.com, www.TheDeptofNumbers.com, www.TheBalance.com, www.CNN.com, www.BLS.gov., and The Colorado Springs Business Alliance.