The Colorado Springs-area real estate market — one of the hottest in the country — has largely been immune to fallout from the COVID-19 pandemic.
Home sales have remained strong and record low mortgage rates are sparking more demand than ever.
“We have not slowed down,” said George Nehme, real estate agent and chair-elect of the board of directors for the Pikes Peak Association of Realtors.
When the pandemic hit Colorado, Nehme said some sellers got nervous and delayed listing their properties in March and April to see what effects the pandemic would have on the market. There were also changes to the way real estate agents conducted business, as public health orders led to fewer open houses and more virtual showings.
Overall, Nehme said the local market did see a slight decline in sales during those months “but not enough to really be concerned.”
“Our issue right now is really with our inventory, which has been low,” Nehme said.
“[That’s] what’s really keeping us from selling as much as we could be right now.”
According to the Pikes Peak REALTOR Services Corp., a subsidiary of PPAR, there were 1,479 active listings for single-family and patio homes in June, compared to 2,122 listings in June 2019.
Despite nearly 650 fewer homes on the market, more sold in June 2020 than in 2019 (1,684 compared to 1,661) and sales of condominiums and townhomes also rose significantly, with 192 in June of last year and 239 in June 2020.
Through the first six months of 2019, there were 7,583 single family and patio homes sold, compared to 7,200 so far in 2020.
“But there were 700 more homes at the same time on the market last year as well,” Nehme said. “So we had more to choose from.”
Because supply is so low and demand so high, home values are appreciating rapidly.
There’s also fierce competition over most listings.
“You look at the average sales price, we’re at $401,980 [for June 2020], where last year we were at $373,792,” Nehme said. “So it’s significantly higher. Sellers are going through multiple offers. We’re seeing five or six offers on homes that are under $400,000.”
Properties listed for under $200,000 have become a rarity in El Paso County. Nehme said only five such residences were sold in June.
“That’s just how many were on the market,” Nehme said, “and they probably had 20 offers on each one of them.”
Certain areas of town, such as downtown and the Old North End, seem to be more attractive than others, and Nehme said homes that become available in those areas sell just “as quickly as they can get the sign in the yard.”
Buyers also tend to search for homes in certain school districts, but with such limited inventory, many are having to be less selective about their ideal neighborhoods in order to find properties that fit their needs and budgets.
The massive demand for homes is due, in part, to the city’s growth and desirability, as its military presence, strong school districts and business community attract many buyers from out-of-town, Nehme said.
But the largest factor driving demand in recent months is historically low interest rates.
Rates were already declining prior to the pandemic and have since plummeted as the federal government has taken action to protect the U.S. economy from the fallout of COVID-19.
On March 3, the Federal Reserve cut the federal funds rate by half of a percentage point.
Twelve days later, it implemented another cut — this time a full percentage point — and set a target rate in the range of 0-0.25 percent.
The Fed also announced in March it would buy as many mortgage-backed securities as needed to support the market and ensure lenders had enough money available for home buyers and refinancers to borrow.
For the week ending March 19, 30-year fixed rate mortgage rates stood at 3.65 percent. Less than four months later, for the week ending July 16, the Federal Home Loan Mortgage Corporation Freddie Mac reported rates had fallen below 3 percent for the first time in 50 years.
“This is the busiest year in the history of the mortgage market, bar none,” said Jay Garvens, branch manager of the Garvens Group of Churchill Mortgage and host of a weekly radio show that discusses home mortgages and personal finance.
“Whenever there is a critical downturn in the economy, rates go down. And activity goes up when people see the rates go down.”
Garvens said 2019 was a record-breaking year for U.S. mortgage lenders, who saw about $2 trillion in volume in purchase and refinance loans.
“And we’re not even to August and we’ve almost equaled that,” Garvens said.
“The mortgage market, right now, is as active and as hot as it’s been in 22 years that I’ve been in the industry.”
Because of the current rates, Nehme said homeowners who might otherwise be interested in selling have been more apt to refinance their mortgages and hang on to their properties, further contributing to the area’s lack of inventory.
The dwindling supply is likely to persist for the foreseeable future.
And although new houses are constantly being built in the Colorado Springs area, there are simply too many people moving here for new housing developments to remedy the problem.
“I don’t see anything on the horizon that’s going to change [the low inventory],” Nehme said.
“All the new developments happening — they’re just not able to produce enough to keep up with the demand right now.”
Though the pandemic has had little impact so far, Nehme said it’s unclear what its long-term impact on the market might be. But he expects the market will remain robust.
“We are staying steady and I don’t see a letdown,” he said.
“I really feel that we should be strong for quite a while, at least through the end of the year if not through the first part of next year.”
Garvens said there’s likely to be some slight fallout from the pandemic, but given the strengths of the local market, he expects them to be relatively minor.
“A lot of that immunity from the downturn is that we’ve got a lot of popularity and an affordable cost of living, but we also have a high percent of federal and state government workers, so a lot of people have maintained their salary,” Garvens said.
“I can see the value of houses potentially slowing, but absolutely not going down. Colorado Springs has had record-breaking months of appreciation. There’s actually far more people that want houses here than are available, and now there’s far more people that can refinance their houses to avoid or preclude any sharp damage financially to their family.
“So there’s going to be some fallout, but not that you’ll see at the surface. You’re going to have to dig deep into the numbers to see it.”