When Kathleen Cancel began shopping for a home earlier this year, she had no way of knowing what a daunting task it would become.
Her criteria were reasonable: Cancel was looking for a home with three bedrooms, a sloped roof and a central location. But in the Colorado Springs housing market, her budget of $120,000 couldn’t quite get her there.
“I already had my money saved up and everything — that wasn’t the issue,” she said. “I started at $120,000; then I went to $130,000; and now I’m at $140,000, and that’s really my top drawer.”
Cancel and her real estate agent, Amanda Luciano with Synergy Realty Group, spent months viewing and bidding on neglected rentals and foreclosed-upon family homes before her offer of $140,000 was accepted in late August on a 931-square-foot ranch-style home located in the Pikes Peak Park neighborhood of southeast Colorado Springs.
“Finding something you can actually afford in this city is pretty rough,” Cancel said. “I’ve walked into places with egg running down the wall and mold everywhere; and I was still looking [at it] because that’s how desperate I was — and everybody else is, too.”
Hers is not unlike the experience of countless others in Colorado and across the country. Those who have traditionally been renters are being pressured to buy because of rapidly increasing rental prices (up an average of 10 percent in Colorado Springs since the same time last year) and historically low interest rates. After closing, Cancel said the $787 payment will cover her mortgage (conventional 30-year with a 3.5-percent interest rate), property taxes and insurance on the home — while she has been paying $950 for rent alone.
But while this trend promotes a healthy economy, it also depletes the city’s inventory of affordable housing — homes priced at less than $300,000 — and creates a challenge for current renters looking to build equity.
“The stuff at the low end is so popular that people have been bidding on it over and above the asking price, so everyone is paying more,” Luciano said. “It has gotten really hard for buyers on the low end of the spectrum. Multiple offers. Fighting with cash investors. It’s cutthroat and those affordable houses are going up in price the fastest because the supply and demand is most out of whack.”
Supply and demand
According to Harry Salzman, of Salzman Real Estate Services and ERA Shields Real Estate, August was the 25th consecutive month in which Colorado Springs experienced increased home sales.
“The fact is that we hit an all-time record high in price at the end of August,” Salzman said. “Prices are continuing to move up. Rental prices are going up every month. And this isn’t just Colorado Springs — it’s a national thing.”
According to data collected by the Pikes Peak Association of Realtors, the average local home sale price was $295,877 in August (up from $294,162 in July), which marks an increase of more than 8 percent since the same time last year. The median price was $265,000, which is 3 percent higher than in July and 10 percent higher than the same time last year. There were 208 active listings and 238 sold listings for homes under $200,000 in El Paso County last month, according to PPAR.
In August, there were 21 percent fewer active listings for homes compared with the same time last year, making it increasingly challenging for prospective buyers who need to act fast to get the home they want.
According to current statistics from the Pikes Peak Association of Realtors, homes in August spent an average of 28 days on the market (a 61-percent drop from the same time last year), while homes under $155,000 were listed for an average of 22 days. Salzman said it is imperative that buyers are ready before making an offer.
“Buyers don’t really have the luxury of thinking it over,” Salzman said. “If there is something on the market that is close to what they want, they have to perform immediately.”
The inventory of unsold homes was down 21.4 percent year-over-year in August and the market has 1.8 months’ supply of homes for sale. Six months of inventory is considered normal.
Listings are remaining active for shorter time frames, 61-percent less than in August 2015, and homes are selling at an average of 99.5 percent of their listing price.
“In Colorado Springs, home prices, including distressed sales, increased by 6.9 percent in July 2016 compared with July 2015,” according to a recent report by CoreLogic. “On a month-by-month basis, home prices, including distressed sales, increased by 0.9 percent in July 2016 compared with June 2016.”
Colorado had the third-largest home price change in the country between July 2015 and July 2016, according to CoreLogic. At a 9.3 percent increase, the state followed closely behind Washington and Oregon.
According to data collected by the Pikes Peak Realtors Services Corp., the submarkets with the lowest median sales prices in August were:
• Old Colorado City: $202,500
• Central: $217,450
• East: $220,000
• Fountain Valley: $232,500
• Powers: $250,000
A typical remedy for depleted affordable housing inventory has been to build more. But while building permits are up 25 percent this year when compared to the same time last year, Luciano said local homebuilders are not creating entry-level product right now. Instead, she said, most homes currently under construction have a price tag of $300,000 or more.
Luciano said one way for potential buyers to stretch their dollars further is to use the services of third-party organizations such as the Rocky Mountain Community Land Trust, a nonprofit that leverages donations to create affordable housing assistance for low-income families.
“It’s an amazing way for people to be able to afford to own when and where they might not otherwise be able to get out of the rental market,” she said.
To qualify for assistance, homes must cost less than $160,000 and the applicants must meet income criteria.
Colorado Springs Mayor John Suthers is expected to address the city’s affordable housing situation during an event this week at The Broadmoor hotel.
(Editor’s note: Amanda Luciano is a former CSBJ reporter.)