Keep it in Perspective
It’s very important to keep in mind that when we are comparing year over year statistics, we are comparing this year’s numbers to last year’s pandemic numbers. This time last year, the Stay at Home orders had just been lifted and our market started to kick into high gear in time for summer. There were drastic circumstances in the market including panic buys and sales, no showings, no open houses, a delayed military moving season and many other influences on last year’s exceptional real estate season. We can’t be sure what these figures would look like had it not been for the pandemic, but we already had some emerging trends that were accelerated with 2020’s events.
Related Reading: Steps to Buy a House
We get a bit confused when national TV networks discuss how “the real estate market” is doing one or the other thing. Real estate is VERY local so it’s nearly impossible to make blanket statements or predictions about broad, national markets. Chicago’s real estate seems to be flat, Colorado’s is screaming. As we just said, real estate is a VERY local business, so things even within Colorado can be quite different. For example, Boulder has home prices that can be as high as real estate in California, but you might be able to snag a cute little house in Canon City for far less money. Making declarations on how the national market is doing can lead to the wrong conclusions and unwise decisions (and maybe even panic). Stick with your local experts to learn about trends in your area.
Related Reading: What’s my home worth?
It’s not a surprise that we have a huge discrepancy between homes on the market and buyer demand. But you will see a contradiction if you compare our inventory (the number of homes available for sale at the end of May) to the actual sales number (the number of homes that sold in May). How is possible that Colorado Springs sold 37% more units with 62% less in inventory year over year? It is clear that we have a high listing to sales velocity. This means El Paso County has a quick sales/list turnover which is evidenced by an average Days on Market time of just 10 days. The actual number of homes being listed in a given month is much larger than what you might conclude at first glance. Those homes are just selling very quickly. The bottom line: inventory is still way too low to satisfy the purchasing needs in Colorado Springs.
Related Reading: Steps to Sell a House
Prices: Still Higher than List Price
The trend of buyers offering above list price with high appraisal gaps started very early in 2021 and it hasn’t slowed down as we roll toward the height of the moving season in Colorado Springs. As you can see below, the average difference between list price and sales price is $21,000.*
Remember when we mentioned at the beginning of this post that year over year comparisons mean that we are comparing to the 2020 pandemic numbers? If you compare 2021 prices to 2019 prices, things do look much different.
Real estate bargains in Colorado Springs are unicorns because distressed properties are extremely rare. In El Paso County there was 1 distressed property listing in March 2021, 2 in April 2021, and 2 in May 2021. Fix and flip investors will reach out to homeowners for unsolicited offers with the hope of trying to snag a property before it hits the market. If you are in the market to invest, you might want to consider a buy and hold strategy.
While real estate is local, there are indicators that may have an influence on our local economy.
- The United States is seeing record numbers of mortgage refinances due to low interest rates. Something that is very different than the housing crisis of 2008? There are fewer and fewer home owners refinancing to pull cash out of their home. Homeowners are refinancing for the lower the rates which is a fiscally savvy thing to do and also very healthy for our economy.
- The Consumer Price Index for May was released last week. Month over month it showed a price increase of 0.6% and a 5% year over year. The CPI is somewhat of an inflation indicator. Are we concerned about the 5%? You shouldn’t be for now. The strongest price increases derive from labor and supply chain shortages (car parts, paints, lumber, etc.) and therefore by demand and not by the speed in which money is being spent by consumers.
Expect home prices to continue to rise until we get more inventory or the economy changes. Until home prices change: stay on top of your credit score, save up as much cash as possible, get an experienced REALTOR to assist you in purchasing a home, and try to remain patient and persistent. As a homeowner, keep a close eye on what’s happening in your neighborhood since this affects your home value. Be involved in your community on a neighborhood, town, city level to keep it a desirable place to live.
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*Source: PPAR.com – a REALTOR only resource.