After years of limp sales and drooping home prices, Colorado Springs residential Realtors say they’re looking forward to a bullish 2013.
The Pikes Peak Association of Realtors reported almost 9 percent more home sales in the last quarter of 2012 than in 2011. On top of that, the average sales price climbed nearly 10 percent year-over-year from $216,817 in the last three months of 2011 to $238,337 in 2012.
Home inventory is also the lowest it has been since 2001. There were only 2,954 homes listed for sale in Colorado Springs in December, 10 percent fewer than at the same time in 2011, according to a report from the Peak Dream team with RE/MAX Properties Inc.
With inventory in short supply, homes are selling quickly. Properties spent an average of 82 days on the market before they sold in December, 76 in November and 78 in October. Those are the shortest average days on market in the fourth quarter since 2006.
“Things are looking good,” said George Nehme, an agent with the Nehme Team at The Platinum Group. “We’re actually seeing multiple offers at the lower price points.”
Nehme said he’s had several properties that sold within days of going on the market, including one a few weeks ago that had three showings in two days — and three offers.
“As long as it’s priced right, it’s selling,” Nehme said.
Benjamin Day, a broker with Pikes Peak Urban Living, agrees that houses are selling.
He wrote five contracts in December.
“It’s just silly to write that many contracts that time of year,” he said.
The market generally slows down during winter months. And it did this winter, but it’s still far outperforming 2011-12. And there are solid signs of market health.
“We saw around a 60 percent probability of sale in 2012,” Day said. “That’s high.”
About 60 percent of the homes that went on the market sold, something Day said hasn’t happened since 2005.
Sylvia Jennings, a broker associate with Peak Dream, said she expects the market growth to continue as homeowners who have wanted to move for years are finally getting into position to make it happen.
“There’s a lot of pent-up demand,” Jennings said. “There are a lot of people who have been living in the wrong house. I think 2013 could be the best year in over a decade for home sellers.”
Jennings said pent-up demand will keep the market moving. It’s also one of the reasons for market improvement now, Day said.
“There has been a lot of what I would say is organic buyer demand,” Day said.
Many homeowners have wanted to move for the past five years and haven’t been able to sell because they owed more than the house was worth or they were out of a job. As prices have stabilized, owners are able to get out of their investments.
Beyond that, they’re willing to lose on the house they’re selling because there’s promise they can win on the one they’re buying.
Nehme said he’s had clients move in from out of town who took a hit on the houses they sold. But because of extremely low interest rates and low purchase prices, they’re confident they’ll be able to recover the loss in the new home.
“Say they bought in 2004 or 2005 at 6.5 percent interest, the timeline is going to be a lot shorter with 3 percent interest,” Nehme said.
While those low interest rates are driving sales, Day said he believes they also could change the way the market works long-term.
“The mobility rate is going to be much lower,” Day said. “People want to get married to this interest rate. They’re actually saying — we could pay this off.”
That means they’re not going to want to move after the average seven years Americans have traditionally stayed in their homes, and it’s changing the way they buy.
“They’re stretching for the neighborhood and the schools and the bigger house,” he said.
If a couple thought they could afford $300,000, they might look up to $350,000 and they’ll stretch $10,000 to $15,000 above their max for the right house, Day said.
While homebuyers are willing to spend more, it seems the market for higher-end homes will take far longer to recover, if it ever does.
There is only a four-month supply of homes priced under $400,000, Jennings said. For homes priced between $500,000 and $700,000, there is a one-year supply. Houses priced over $1 million are sitting on the market long enough it would take six years to sell through all of them, Jennings said.
“There have been some demographic shifts,” she said. “The people buying those big luxury homes were mostly the Baby Boomers.”
Now the Boomers are downsizing, and younger generations are coming up. The demand for big expensive homes might not ever rebound to where it was, Jennings said.
Realtors said they expect the market will continue to grow this year. Most expect interest rates and inventory will stay low, which means prices will be able to climb.
Nehme said it’s possible interest rates could go up a percentage point and would still be low enough to make buying attractive, especially when most people expect rates to start climbing more aggressively after this year.
Of course, the positive changes in the market could lead to new inventory, which could suppress some of the market growth, Day said.
“We could see sellers greedily coming back on the market,” he said.
And it’s hard to say what impact that would have.
“Overall,” Jennings said, “I think 2013 is going to be bullish.”