First and foremost sorry for missing last month. We had some issues with the website and dealing with that wasn’t a top priority. Now its fixed and here we are!
Last year going into May we had 1,280 active listings. Today we have 1,912 single family existing homes active on the market here in El Paso County. That makes a difference and in some areas of town where inventory is getting really saturated it’s making a very noticeable difference. What’s the difference? Buyers get to sleep on it and sellers get to stress.
This is now the 6th month in a row that I do not have foreclosure data from the El Paso County trustee. I just reached out to them and asked them WTF is going on with their record keeping. I can say from my own scope of the market that I am seeing more short sales popping up and short sales are to a foreclosure what a small red dot on your face is to a giant zit. Seriously I don’t know why we’ve had records going back to the late 1980s and suddenly don’t. I will find out.
Interest rates fell briefly at the beginning of April during the whole stock market sell off. People panicked. Some sold. The smarter bought. Money was transferred from the impatient to the patient yet again. And interest rates rebounded right back into the range we’ve been in for basically the last 2 and a half years. Nothing to report on here outside of a flash crash 4 weeks ago that’s long forgotten today.
Sales wise where are we at? For April we’re at 927 total sales in our MLS for a median sold price of $485,000. This has been incredibly stable. April of 2024 we saw 857 sales at a median sold price of $477,500.
Since I skipped March this year we had 877 sales at a median sold price of $470,000 and last year 788 sales at a median sold price of $451,500.
So it can be argued that the market has picked up sales volume from last year and that would be true. However the market did not pick up proportionally to the amount of inventory we have. For April we have an 8% increase in sales volume and for May we have a 49% increase in inventory. Do you think buyers or sellers are benefitting from this?
By far the most I’ve seen in years we have 40 short sales under contract in our MLS with the vast majority of them in 80911 and 80817.
Outside of the 40 short sales we have like 26 listings right now, about half of them active, that are marked as in foreclosure. These are all essentially rookie numbers by 2008 standards but we do need to get ready for the back up to clear.
You see since the thing happened in March of 2020 foreclosures basically stopped. And now lenders are slowly starting to process them again. One a time they’re hitting the market and as their auction date grows closer and closer those sellers become more and more willing to part with whatever remaining equity they’ve got. I just looked at one that’s on the market right now that did a price cut from $410,000 to $330,000. That’s how you shave value on your comps and that’s how with a large enough sample size you rotate a whole market lower.
Basically what I’m trying to say here is that we have had essentially no foreclosures hit the market for 5 years now. And so any amount of them hitting is going to seem significant in a market where inventory is already starting to pile up due to affordability issues. To sum it up conventional loans have been getting foreclosed on, VA foreclosures are just now starting to really get processed, and FHA foreclosures are still kind of backlogged due to politics but are coming. Just for fun stats for Q4 of 2024
Conventional loans have a delinquency rate of about 2.62%
VA is at 4.7%
And FHA is always the rockstar overachiever coming in at……. 11.03%
These are summary rates not just 90 day plus which are significantly lower. But let’s use FHA for an example. The 90 day plus DQ rate is over 3.5%. These are people that are almost certainly going to get foreclosed on. Doing some back of the envelope type math.
El Paso County has approximately 312,000 housing units.
Approximately 65% of those have a mortgage so that’s 202,800.
Roughly 12% of those will be FHA loans. 24,336 units.
So one can assume that we can see roughly 850 foreclosures assuming national rates apply to us here locally from just FHA loans. While I know this whole write up so far probably sounds kind of alarming that’s actually kind of a drop in the bucket number. In 2009 and around it we were seeing over 5,000 foreclosures annually in our area. So even if all of this inventory was to drop in a year it wouldn’t make history at this point.
However I’m not saying this is a nothing burger either. As mentioned earlier sales are up 8% year over year and inventory is up 49%. Simple supply and demand concepts lead me to believe that prices will likely drop assuming that rates remain steady and inventory exceeds buyer demand. I can say with 100% certainty that in many market segments price reductions are happening and happening rather aggressively. What makes it feel kind of weird is the median price that I refer to monthly remaining so stable. But that indicator is kind of misleading because as we have fewer starter homes selling we still have a relatively healthy higher end market that is not impacted by rates nearly as much as the rest of us mortals. So you have higher end sales dragging up the median while the reality on the lower end of the market is increasing days on market and sellers competing by lowering prices and offering incentives. Meanwhile on the high end, and by high end I mean like significantly over the median price, the buyers are looking for tax friendly places to park their money in anticipation of further inflation long term.
I feel like one mistake that real estate agents constantly make is treating our local market as a bubble. But Iggy we have all the military bases, we have the Olympic Museum that 1 out of 20 people reading this have been to and of course we have Pikes Peak! We’re special! And while it is absolutely true that Colorado Springs is a pretty cool place with a lot of outdoorsy stuff to do it certainly isn’t the only cool town with a mountain near it. And since people tend to flow from where life is harder and more expensive to places where its better and more affordable I think seeing the big picture here is important.
If we as a city are competing with the rest of the country for our residents then its important to understand migration patterns. Let’s do a nerdly deep dive into the last 30 years of migration in Colorado, some Pikes Peak or Bust action.
From 1995 to 2015 we saw a massive influx of people coming in primarily from CA, TX, IL and NY. In 5 years between 1995 and 2000 Colorado took in over 110k Californians alone! The political refugees seeking asylum here in Colorado were generally younger, mostly under 30 years old when moving to the state. The political refugee thing is a joke, but its contribution to the current imbalance in Colorado’s politics is a tangible thing. I’ll get back to politics here in a sec after I get done talking about growth and start talking about shrinkage. 1995 to 2015 saw a 49%, or 1.6 million resident growth in state wide population! During that same time frame El Paso County grew by 206,000 residents or by 43%.
Now around 2015 something interesting happened. Colorado Springs specifically no longer became cheaper than the national average in cost of living. And Denver was exceeding that metric significantly. And Pueblo, well it’s still there. So with the rising cost of living here in CO our net migration began to slow from roughly 80k people a year moving here to less than 50k a year until 2020. And then something even more interesting happened!
We became so regulated, so populated and so expensive that we began to lose residents with 2022 having a negative migration of 10k people. 2023 we gained something like 7k residents but we now sit at a level of basically net 0, no population growth. The people who are still moving to Colorado tend to be younger while the people who are leaving Colorado tend to be older. So the older people are taking their money and parking it elsewhere. Meanwhile young people moving here have to deal with one of the most expensive housing markets and pretty unremarkable job opportunities.
Since we’re not in a bubble what are some other markets doing? Well the biggest loser year over year in pricing is San Francisco where median prices are down almost 11%. I don’t want to live there, do you? Apparently a lot of people are fleeing from the open air shit show they have created there. Then you have Austin, TX that absolutely blew up in 2020 blowing off close to 8% year over year. A bunch of cities in Florida are down 5% or more. Nashville is down. Denver is down almost 6%. These are all places we compete with and buyers look at.
So where are prices growing and why? Jackson, MS just had one of its biggest years of appreciation over 20%. Why? Because it was and still relatively is insanely cheap to live in. Peoria, IL. Same reason, almost 20% growth. Cleveland, OH and the rest of the rust belt are sitting pretty relative to the whole west coast because people can afford to live there without breaking their backs every waking minute of the day. Me personally I’ve got a project going with a buddy in north eastern Tennessee. It’s going to be like a 2400 square foot 4 bedroom 3 bath house, fully remodeled, on roughly an acre of wooded hillside property. It’s a beautiful spot and we’re hoping it sells for around 375k. The same house here in Colorado Springs in a similar setting would fetch probably 750k.
Let’s get back to politics for a second and try not to hurt any feelings. Right now Democrats lost their super majority status in both the house and senate but both are still heavily controlled by the blue party.
Senate 23 Democrats and 12 Republicans
House is 43 Democrats and 22 Republicans.
Colorado has been a blue state since roughly 2008 and we’ve had a brief but vocal Democratic super majority here that just ended in 2024. I am not a republican, I am not a democrat, I am sharing statistics here with the help of my friend ChatGPT.
Let’s talk about some achievements that are contributing to the net 0 or worse migration pattern we’re seeing today.
Colorado has over 200,000 different restrictions on business dropping our state from 4th to 16th place for favorable business conditions according to the business journals.
Cost of doing business in CO 39th place, cost of living in Colorado 46th out of 50, housing affordability in CO 47th place.
Colorado comes in 43rd in overall road quality with traffic congestion becoming an increasing nuisance.
We also rank 8th highest in violent crime, 4th highest in property crime, and just recently gave up our #1 spot in auto theft nationwide.
And then of course there are the insurance costs associated with living in a place where ice can fall from the sky 5 months out of the year and where fire could potentially swallow your whole suburb just about anytime. Colorado homeowners according to insurance.com pay an average of $348/month for home owners insurance where as the national average is about $217. Sure some of this can be attributed to higher property values but mostly its attributed to higher rates of risk due to the factors mentioned above.
In addition to nature shooting ice bombs at us we have politicians throwing shit sandwiches at us as well. Over the last 5 years it has honestly been difficult to keep up with all the pro tenant, anti landlord legislation spilling out of Denver. As someone that owns rentals I can tell you that our legislature has put laws into place that address the very tiny minority of problem tenant/landlord relationships but have done it in such as way that it impacts the way the other 99% have to do business. Since affordable housing has been the primary rallying cry here the only thing our legislature has done is create more restrictions, more rules and less incentives for landlords to want to be landlords. You can tell this legislation has failed since we’re literally in 47th place. But this makes sense as a good chunk of the people writing this legislation do not own property, have never been landlords and are just life long victims of the 28 hour work week. Right now if you were to buy a rental property in Colorado you would be lucky to have a 5-6% return on your money, without accounting for any financing charges, taxes or carrying costs. Meanwhile you would be obligated to navigate the increasingly complex set of laws while hoping and praying that everything works out. Or you could park your money in any one of dozens of financial products that carry no risk and offer the same return. Hmmmmmmmmmmm.
To summarize this whole rant we have to do much better. We’ve made some big improvements here in our state like for example our education system has improved drastically over the last decade and went from ranking as one of the worst to now one of the best. That’s great! We have so much more work to do as any of you driving anywhere in this mofo can attest to. I think overall our state would benefit greatly from a more balanced political approach, as would the whole nation. I think going out of our way to pass dumb ass legislation that discourages free market activity within housing is directly contributing to a cost of living that is artificially high. I think solving problems that are tiny by creating laws that apply to everyone is a stupid approach. I think that the vast majority of people are good, want to do good and want to see others do good. I do not think that politicians know better than the average person and I think that writing legislation to show off how far left or how far right you are to appease your sponsors is a shameful game for personal gains rather than for the good of the public. I can rant on this forever.
Basically real estate wise. We have inventory that is growing. We have more distressed inventory heading our way. We have competing markets to ours in decline. We have some of the shittiest laws regarding rentals in the country. We have some of the highest costs of living and housing in the nation. And we are not keeping up with many of our competitors in jobs and pay thanks to excessive regulation. We can not solely rely on mountains and military bases if we want sustained growth and stability in our housing market.
We need more balance, more investment in our infrastructure, and much more incentives for companies to want to make Colorado their home base. There is opportunity here as we see competing cities like San Francisco utterly fail, we just need to capitalize on those opportunities rather than copy those cities mistakes.
I’ll get more graphs out next month gang. Time to go sit an open house then go look at a glut of inventory on the west side!