If you live in this part of the mountains, you may have noticed there are a lot more “for sale” signs in your neighborhood lately.
That’s pretty much true throughout the Colorado Springs area. After four years of sellers being in the driver’s seat, the number of homes listed for sale has climbed to a six-year high.
Spirited bidding wars among buyers are a fond memory. Once again, the Colorado Springs housing market is becoming a buyer’s market. Prices are flattening.
“Buyers can now be more aggressive in making offers on the homes they want,” said Lee Milner, a Heritage Realtors agent who mostly represents home buyers rather than sellers.
To be sure, the housing market is immeasurably healthier than it was during the collapse of the late 1980s, when a flood of foreclosed homes forced home prices into a steep decline. And although prices have been flat in recent months, the city’s median home price is still more than the national average.
The latest shift in the housing market is a product of the constantly changing relationship between the markets for new homes and homes already occupied.
Resale homes have been a relative bargain for most of the 1990s, costing about $40,000 to $60,000 less than the average price of a new home.
But that gap has been closing. The average price of a resale home rose three times faster than new home prices between 1992-96, leaving little cost difference between resale and new homes.
“That has made a new home a more cost-effective option,” said local economist and housing market consultant Dave Bamberger.
But the days of resale homes skyrocketing in value are over, at least for now.
One statistic best illustrates the trend: The average asking price of homes sold through the Pikes Peak Association of Realtors has edged up less than 1 percent in the past year. And the average home is spending 97 days on the market before selling, nearly a week longer than a year earlier.
One reason: At the same time resale home prices were escalating, the supply of homes on the market was beginning to balloon. The number of homes for sale at the end of July, the latest date for which statistics are available, has jumped nearly 30 percent from a year ago.
Another reason: Job growth has slowed, slowing home sales even as the inventory of houses on the market expanded. As a result, sellers had to wait longer to find buyers and lower asking prices to get homes sold.
“If you’re a builder, you can offer a few points off the mortgage, free sod or appliance upgrades to spur sales, but if you’re selling your own home, all you can do is lower the price,” said Bud Patterson, co-owner of Prudential Patterson Realtors.
Wait a minute, you say. Isn’t the average price of a home in El Paso County going up?
Yes it is. The Pikes Peak Association of Realtors reports the median price of all homes sold in July was up 6 percent from a year earlier, to $124,000.
But some students of the local real estate market say it’s flat and may even be dropping. Milner said studies he and another Heritage agent completed of similar homes in the same neighborhoods reinforce that analysis.
For example, a three-bedroom, ranch-style home in the Rustic Hills area sold for $112,000 in February. Two and four months later, two comparable houses sold for only $900 more. A fourth comparable home in the same neighborhood is listed for sale at only $105,000.
In another example, a three-bedroom, tri-level home sold for $120,000 in December, while three of four subsequent sales of similar homes since then were at lower prices.
Sales of new homes also are down from a year ago, but at less than one-third the rate of decline felt in the resale home market during the same period. Last year, declining mortgage rates early in the year helped push new-home sales to a 10-year high.
Homebuilders have been able to keep sales relatively strong by offering everything from home entertainment centers to extra-fancy kitchens to entice buyers.
“It seems as if everyone at once is trying to cash in on their equity and move up into a bigger house,” said Jeff Smith, chairman of Elite Properties of America Inc., parent of Classic Homes. “That has reduced demand for resale homes and increased demand for new homes.”
Are resale homes doomed to remain unwanted and underpriced? Not necessarily.
Smith said the competitive advantage new homes have over resale homes won’t last long. New-home prices have been artificially low for the past five years because developers have been selling lots where costly major streets and utility lines already were built.
“The price of new homes will have to go up 6 percent to 10 percent next year,” Smith said, “because lot prices will include the cost of major public improvements for the first time in 10 years. We have already built on all of the sites that had improvements already completed.”
Lots in Briargate will have to include the cost of extending Briargate Parkway, while lots in Nor’Wood will have to include the cost of extending Austin Bluffs Parkway, Smith said. Those projects could add up to $5,000 to the cost of a lot, he said.
“Right now, it is hard to find a lot that costs less than $22,000. By this time next year, it will be difficult to find a lot under $30,000,” Smith said. “I am worried about the affordability of new homes. These higher prices will mean that people will have to buy smaller homes to qualify for mortgages.”
Sue Miller, vice president of sales and marketing for U.S. Home Corp. in Colorado Springs, said suppliers have told homebuilders to expect another significant increase in lumber prices. Once new-home prices start escalating, the resale home will begin recovering and recapture much of the market share it lost this year, Smith said.
But until then, homeowners who sell their homes will do well to avoid losing money on the deal.
