Colorado Springs Real Estate has a reputation as an affordable outpost amidst expensive Front Range options. For most of the last decade, less than 5% of all sales in the Pikes Peak MLS were in excess of $500,000.
In 2017, that percentage increased to over 8%. This shift accounted for some of the 9.9% appreciation in average price.Before the reader begins drawing conclusions about “all those Denver buyers must be buying down south,” there is little empirical proof of that statement. In fact, when actual numbers are compared, the room for growth in the El Paso and Teller County high-end markets (over $500,000) compared to the more expensive Douglas, Arapahoe, Denver, Broomfield, Boulder and Jefferson County markets, is pretty staggering.
RSC, the MLS of the Pikes Peak Region recorded 68 $1 million sales from Monument to Divide (El Paso and Teller Counties).
REColorado.com, the MLS for the Denver Metro area, recorded 1656 residential sales in excess of $1 million from Larkspur to Boulder.
The reality is that while 68 sales in excess of $1 million represented a 51% increase from 2016 and was the highest number ever for the Pikes Peak MLS, it is exactly half of what the Denver Metro Area sees close EACH MONTH.
The Denver Metro MLS encompasses a population 4.5 times larger than the Pikes Peak Region, yet yielded 24 times the number of million-dollar-plus sales.
There is some overlap between the two MLS systems, notably around Larkspur in Southern Douglas County, and the Pikes Peak RSC MLS reported a total of 78 sales in excess of $1 million when all counties with participating data were counted. Statistically and geographically-significant zip codes reported these sales over the last five years:
The previous year of years for high-end sales was 2007. The odd reality of 2007 was that single-family unit sales activity was 30% off the pace of the record year of 2005, but the high-end buyers’ willingness to purchase expensive homes was never more out-sized. The 2007 market yielded 65 sales in El Paso and Teller Counties and 71 in all reporting counties. Statistically-speaking, the 2007 million-plus market claimed a much higher percentage of the market than the 2017 market.
Immediately following 2007, that million-plus market evaporated, with 2009 producing only 23 sales. While the economy was humming in 2007 with similarly low unemployment and robust Wall Street returns, the supply of housing on the market was ballooning and the number of bad loans was about to cripple the entire economy. The debt crisis that is looming today is different: it’s credit card debt. This summer, American consumers surpassed $1 trillion in credit card debt. The only other time in history consumer debt surpassed $1 trillion? 2008.
The Pikes Peak RSC market had been averaging 3 to 4 $1 million+ units sold per month for the previous seven years… until the election of Donald Trump as president. Almost instantly, high-end contracts started happening in November and December of 2016 with the first big wave of closings beginning in January, 2017. Even today, as of this writing (January 17, 2018) there are 19 properties over $1 million+ properties under contract. The present pending activity is actually closer to a 100 unit/year pace. Even with rising interest rates and all that credit card debt, buyers operating in a market with very little quality product will increase their search-price by $50,000 to $100,000. It is this activity more than any other that increases average sales price, and that activity will only increase in 2018.
While all of this points to growth in the high-end market, the head-scratching part of the market is that the six areas with average asking prices in excess of $500,000 saw less than 3% growth in terms of sales units.
On the north-end of the county (a part of the county that “should” see influence from the Denver Market) Black Forest, characterized by the Zip Code 80908, saw large price gains again. One-year after posting 10.4% appreciation in 2016, homes saw an 11.7% average gain in value in 2017. But Unit Sales were actually down 21% in Black Forest. Similarly, Northwest (80919) saw handsome price appreciation (11.5%) and a significant drop in total units sold (-13%).
The High-End Market that saw the biggest gains across the board? The 80904 Zip Code known as WES, where Kissing Camels had a staggeringly-consistent year. Unit sales were 21% higher than 2016 with average price gains out-pacing the MLS at 12.7%.
The biggest head scratcher? Monument. The TRI (Tri-Lakes) market composed of 80132, 80133 and a smidgen of 80908 (High Forest Ranch and now Flying Horse North) had the smallest rate of home-price appreciation of any of the 15 MLS areas we track. While sales activity grew by 7%, this was also the only MLS area that saw the probability of sale, decrease. For every 100 homes listing in TRI in 2017, 71 sold. For an area with an average sales price approaching a half million, 71% probability of sale is exceptional. But buying in TRI was simply more-probable in 2016, when 80.6% of all homes sold. Given that inventory levels were smaller throughout 2017 and that Denver-Metro buyers were supposedly buying in Northern El Paso County in enormous numbers, seeing these mild increases and notable decreases in the Monument Market is eye-opening.
What will happen in 2018?
Quality product, properly-priced, will sell faster, and at a premium value.
Our predictions are that unit sales across the board will drop in 2017. It is simply getting too expensive for entry-level buyers to buy and this will impact the total number of homes sold under $300,000 (58% of the market was under $300,000 in 2017). Correspondingly, over $500,000 sales will represent an even larger percentage of sales in 2018. Will sales increase in number? Possibly, but for sales to grow it will require seller participation, not just buyer-willingness to buy. While buyers are very willing, the market is not providing. One of the reasons sales were down in Black Forest and Northwest was that there was very little good quality product to buy in 2017. It’s not likely sellers who are committed-to and love their area (consider, 80919 had 346 homes burn in the 2012 Waldo Fire and 80908 had 490 homes burn in the 2013 Black Forest Fire!) are going to make an economic decision to cash out and move. For these sellers the big question would be “move where?”
Will higher-end homes increase in value? That is very likely. It has simply become hard to build a “dream home” for under a million dollars in this county due to the shortage of available dirt. Cathedral Pines lots regularly cost in excess of $275,000 now, and Flying Horse North lots average $350,000+. Flying Horse has only 15 “Choose Your Builder” lots left. Lots in the gated neighborhoods of the Broadmoor average $410,000 in asking price, and at this writing there are only 15 to choose from. Lots a quarter acre and smaller in Kissing Camels run $135,000 to $175,000 and buying one of the few remaining lots in the Fairways Filings starts at a third of a million dollars. Because “the best dirt is probably already built on” any homeowner on dirt simply has to sit around and watch their asset increase in value.
Because dirt has accelerated in value faster than the rest of the market, and so too has the cost of materials used to build homes, this does present an opportunity for a buyer willing to invest $100,000 to $300,000 in remodeling an existing home.
To get abstract with this, another aspect that will only increase the sales prices in these six higher-end MLS areas is the rapid shift in consumer motivation around ownership. All six of these areas have major advantages relative to other MLS areas because of how they accommodate the changing desires of homebuyers. The demographic of late 30’s to late 60-year olds that are likely to buy homes over $500,000 for the next ten years will see the normal motivations of bedroom, bathrooms and quality of schools, but their real beneficial motivations will increasingly be influenced by:
- An increased desire for simplicity
- An increased desire to retreat from the madness of a vitriolic, over-connected, device-filled world
- Places of rest and rejuvenation as characterized by access to amenities, shorter commutes, nurturing spaces, or all of the above.
It’s because of these long-term motivations that we make three different, but motivationally-connected statements:
- It’s as good as time as any to be a high-value general contractor in Colorado Springs
- It’s as good as time as any to invest in making your present residence a place you’ll want to nest for the next 10 years
- If you are a contrarian to the forces of the market place and thing “shoot, I might as well cash out while the market is so strong” your financial windfall will likely be handsome. You just have to answer for yourself, “where do I move next?”
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, Fort Collins Board of Realtors, www.corelogic.com, www.TheDeptofNumbers.com, www.TheBalance.com, www.CNN.com, www.BLS.gov., and The Colorado Springs Business Alliance.