High-end market could be the hot spot of the year

Filed under: Print,Real Estate | Tags:,

Last week, industry insiders and local business leaders gathered for the 20th annual Institute of Real Estate Management Economic Forecast Breakfast.

The presenters shelled out their best takes on what to expect for Colorado Springs real estate in the year ahead, which begged the question: Is it technically a forecast if you predict that nothing will be happening?

But not all corners of the real estate market are created equal. Surprisingly, the market for high-end residential homes could be the lone hot spot for the Springs in 2011.

According to data from RE/MAX Owner Bruce Betts, sales of homes over $400,000 were up 23 percent in the first half of 2010 compared with the same period in 2009 and up 9 percent in the second half.

The same trend applied to homes valued at more than $750,000, and even those over $1 million.

“There is a good supply of high-end houses right now, which means good prices for potential buyers,” Betts said. “People in that upper end are feeling a little more comfortable with the economy now, and they’re looking to take advantage of low prices and low interest rates.”

Betts said a down market, which is a charitable way of describing present conditions, is the best time for buyers looking to move up.

“One of my clients had to drop the price on their home by $30,000, but the house they bought had fallen by $100,000,” he said. “There are a lot of opportunities like that out there. You might take a small loss on your current home, but you’ll make up for it in savings on the bigger home.”

That’s good news for wealthy homebuyers; but first-time buyers are stilling finding themselves locked out of the market. Sales of homes under $250,000 declined by 25 percent in 2010, as low-end buyers struggled to obtain financing.

Still, Betts said, with prices where they are, buyers in every price range should be on the lookout for good value. He recommended first-time buyers hook up with an experienced real estate agent to explore nontraditional loans that banks are offering to spur investment.

Some local banks are offering self-originated portfolio loans (at slightly higher rates because the loan will be held by the lender as an investment), or conventional products that require lower down payments than traditional FHA-backed loans.

Betts knew of nontraditional loan programs in Colorado Springs available at Adams Mortgage, First Community Bank, Key Bank and US Bank.

Not all landlords are strong-arming

Last week I wrote about how the Colorado Springs apartment rentals market is at a tipping point, with the balance of power quickly swinging in favor of the landlords.

This means most renters can look forward to increased rent and decreased landlord concessions in the months ahead, but Development Director Jill Gaebler of Colorado Springs-based Greccio Housing called me up to tell me not to make blanket statements about all landlords.

Greccio owns or manages 17 properties in the area, which is enough to make it the sixth largest multi-family property management company in El Paso County, according to the Business Journal Book of Lists.

The company, which focuses on low-income community housing, hasn’t raised rent on its tenants in six years and says it has no plans to do so in the immediate future.

“We typically purchase older properties in more blighted areas in an attempt to rejuvenate a neighborhood,” Gaebler said. “As a non-profit, we raise money through grants, get special funding from banks, and got some stimulus funding, and we pass all of that along to the residents.”

Greccio has a significant presence on the east side of town, where transportation options are limited and people need to live close to where they work or go to school. But industry insiders say there is no better time to invest in apartment buildings, and Greccio has designs on expanding.

“There are so many properties going into foreclosure, and we have a strong reputation for being able to turn those around,” Gaebler said. “We’ll hopefully be able to take on management of at least one more large property this year.”

Still, Greccio faces the same restricted lending environment as every other player in the game. Gaebler said Greccio’s nonprofit status doesn’t get it any preferred treatment when it comes to landing financing.

“We have a good reputation with banks in town, and we try to leverage our reputation,” she said. “But it’s hard for anyone to get a loan right now.”

Jonathan Easley can be reached at jonathan.easley@csbj.com or 719-329-5235. Friend him on Facebook, find him on Twitter, and follow his blog at www.csbj.com/realestate.