As much as I know about our local real estate market, I don’t know everything. So once a month, I bring into the studio a man who does know everything: Empire Title’s Bill McAfee. As the owner of one of Colorado Springs’ most successful title companies, Bill sees trends and patterns in the real estate and lending markets first-hand, and once a month he stops by to share his insights with me and my radio audience.
His biggest insight this time around was that the inventory glut of the last several years seems to be leveling out. The number of homes listed on the local MLS is at a 10 year low. And while sales for 2014 are so far 3% down versus 2013, the third quarter of 2014 saw the most activity since 2006. Year-over-year, home prices are up 4%. We aren’t seeing the double-digit gains of last year, but 4% growth is a solid and healthy development.
These numbers vary across price brackets, however. Homes over $750,000, and especially over $1 million, have extremely high inventory levels, show no growth in value, and are staying on the market far longer than lower- to moderately-priced homes. For whatever reason, the high-end market is sputtering while the rest of the market appears very healthy. Inventory has normalized, interest rates are still very low, and prices are no longer accelerating wildly.
The developments in our local housing market, and the disparities between the lower and higher ends of the market, are the result of the choices we as a community have made. It is, in a sense, “the house we built.” This is evidenced throughout the country. Right now, the hottest sectors of the economy are oil and technology. Silicon Valley and Seattle have extremely hot real estate markets. But the fastest growing markets are in oil-producing areas, with Texas and North Dakota well represented in surveys of the fastest-growing areas. In fact, 8 of the top 10 fastest growing areas are directly linked to oil exploration.
We see this locally in Colorado. Our state’s fracking and drilling ventures are generating a lot of money for a lot of people. As many oil companies have their regional headquarters in Denver, that city is seeing the benefits of expansive drilling. El Paso County, unfortunately, does not have oil to drill. And Fort Collins is scrambling to preserve their local ban on hydraulic fracturing. Which is fine. It’s their house to build, and they can build it any way they want. But they shouldn’t expect Denver-levels of growth, especially after the higher education bubble bursts.
Our communities are the houses we built together. Looking around the country, from Seattle to Houston to Fargo, you can find a multitude of successful ways to build a house, and many unsuccessful ways to do so. Locally, we have gathered military contractors, non-profits, and military installations to create a relatively stable house showing all the qualities that Bill illustrated on the show. Any changes in the market can be attributed to decisions our community made for itself in the past; and if we want to see any particular changes in the future, we need to make the required decisions today.
9-20-2014 The House We Built