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Local Home Prices Fall Again in 2010

By Rich Laden, The Gazette
From Colorado Springs' swankiest neighborhoods to its middle-class subdivisions to El Paso County's rural areas, 2010 was a tough year for home prices in the Pikes Peak region.

The median price of single-family homes sold in Colorado Springs and El Paso County dipped to $210,000 last year, a 0.8 percent decline from 2009, according to The Gazette's sixth annual analysis of local home sales and prices. It was the second straight year prices dropped, after a string of year-over-year increases. The countywide median declined even more last year - to $200,000 - when foreclosures and short sales were added to the mix of properties analyzed.

The trend was similar in individual city and county neighborhoods, where six out of every 10 saw falling prices when compared with the prior year, according to The Gazette's analysis. When distressed properties were added, prices fell in seven out of every 10 neighborhoods.

"In the trenches, you just see that each neighborhood has some issues with foreclosures or short sales," said Joe Clement, broker/owner of Re/Max Properties in Colorado Springs. "And when they hit in a neighborhood, it really hurts."

Foreclosure sales include properties that went through the state's foreclosure process, were taken back by lenders and then re-sold, often at a discount. A short sale is a deal in which a lender lets a homeowner sell a property for less than what's owed on the loan balance so that the owner can avoid a foreclosure; the house typically sells for less than market value.

In addition to the effects of distressed properties, experts say lower prices reflect last year's ongoing economic struggles. A high El Paso County unemployment rate, shaky consumer confidence and lenders' increasingly tougher borrowing requirements all combined to hold down demand, which, in turn, keeps a lid on prices.

The Gazette's annual home-price analysis uses El Paso County Assessor's Office records to determine the median price of single-family homes that sold in the county. The median is the midpoint of all prices in a group of sale prices.

For its tax-assessment purposes, the Assessor's Office draws boundaries of single-family neighborhoods, of which there were 80 in 2010. Unlike broad ZIP code areas, or multiple-listing service areas used by real estate agents, the assessor's neighborhood boundaries group together similar properties based on factors such as housing styles and economic characteristics including household incomes and average home prices per square foot.

The Gazette's analysis looks at sales of traditional single-family homes and modulars, but not townhomes or condos. The analysis is relatively simple: The Gazette assembled sale prices of all single-family home sales across the county and in the assessor's 80 neighborhoods in 2010, determined the median of those sale prices and then compared them against similar median prices from 2009. A couple of caveats when it comes to the analysis. Year-over-year percentage changes in prices can swing wildly if only a handful of sales took place in a neighborhood. Also, the Assessor's Office frequently updates its records, so it's possible that home prices in some previous years of The Gazette's analysis have changed.

Highlights of the 2010 analysis include:

In the assessor's 80 single-family neighborhoods last year, 48, or 60 percent, saw a year-over-year price decline, while 32 saw increases.
The number of neighborhoods with falling prices rose to 57, or 71.3 percent, when distressed properties were added to the analysis. Another 20 areas saw price increases, even when distressed properties were added; three neighborhoods saw no change.
Prices fell everywhere. A handful of neighborhoods in eastern and southern El Paso County saw some of the biggest price decreases, including a nearly 64 percent drop around the town of Calhan, although only a few homes sold in that area last year. Year-over-year declines of more than 15 percent were found in the upscale neighborhoods of Cedar Heights in northwest Colorado Springs, Broadmoor Bluffs Estates on the southwest side and Kings Deer in northern El Paso County. Prices fell by 9.5 percent to nearly 13 percent in more-modest neighborhoods such as Garden Ranch in northeast Springs and Cimarron Hills, an unincorporated area bordering the Springs' east side. Many of those areas saw bigger price drops when distressed properties were factored in.
Neighborhoods with year-over-year price gains in 2010 included North Wood and North Cascade, north of downtown Colorado Springs; Little Ranches near Fountain, south of the Springs; Northgate and Flying Horse on the city's far north side; and the city of Manitou Springs. Greencrest, a somewhat secluded neighborhood on Colorado Springs' northeast side, had the biggest year-over-year increase - 31.1 percent, although only a half-dozen home sales took place in the area in 2010.
Countywide, home sales totaled 5,681 last year, a 9.2 percent decline from 6,260 in 2009.

Even as local prices fell last year, several cities around the country saw steeper decreases. According to the National Association of Realtors, fourth-quarter prices dropped 12.5 percent in Atlanta when compared with the same period a year earlier; year-over-year declines also were found in Tucson, Ariz., 12.2 percent; Dayton, Ohio, nearly 10 percent; and Orlando, 8 percent. National Association of Realtors' statistics were compiled differently than The Gazette's home-price figures, yet they still provide a snapshot look at what was happening in other markets around the country.

"Things are down, but when we correlate it to the rest of the market, we're not as bad as everyplace else," said Harry Salzman, owner of Salzman Real Estate Services in Colorado Springs.

Bill Hurt, broker/owner of ERA Shields Real Estate in Colorado Springs, thinks the housing market has about hit bottom. But any recovery won't necessarily be a quick one, he said. He expects prices to be flat in 2011, as distressed properties continue to take a toll on the market.

"The foreclosures aren't going to go away tomorrow," Hurt said. "We still have a pretty substantial inventory of foreclosures to work through."

Other factors could affect the market, too. The demand for housing could be hurt by homebuying changes being considered by federal lawmakers, Salzman said. Tougher requirements for homeowners to obtain a mortgage, such as boosting down payments to 20 percent of the purchase price on conventional loans, could put a home out of reach for many buyers, Salzman said.

That, in turn, could lead to a flood of investor purchases and a greater demand for home rentals, he said.

"The market is not strong in appreciation," Salzman said. "That's a fact. What will move the market in that direction is if we get some new jobs here. And I mean the kind of jobs that (create) spin-off jobs."

The Pikes Peak region will remain a buyer's market over the next several months because of low prices and competition created by distressed properties, said Kevin Patterson of The Patterson Group in Colorado Springs.

Yet buyers should heed some words of caution, Patterson said. There are signs of improving economic conditions and it won't be a buyer's market forever, he said.

"The truly outstanding properties, they're (buyers) not going to have 10 of those to choose from. There are only so many oceanfront properties, there are only so many truly stellar properties available," Patterson said.

"The second word of caution for buyers is that interest rates will move up. It's a question of when, not if. And with that, some of their buying power will be impacted if they're getting a loan. So waiting to try and time the absolute bottom of the market? We will know the bottom of the market six to eight months after it's happened."