Colorado Springs Housing Market Slump: Not Going Anywhere

The Colorado Springs housing market remained mired in a slump in June, and at least one local economist says not to expect a turnaround until at least next year.

The supply of homes listed for sale soared to 6,870 in June, breaking a month-old record number of 6,567 in May, according to a report released Monday by the Pikes Peak Association of Realtors.

Despite an uptick in Colorado mortgage activity, the number of home sales whose transactions handled by real estate agents fell 17.5 percent in June when compared with the same month last year.

The result of a record-setting supply and slowdown in demand: The median price of homes sold in June — the midpoint of sale prices — dropped 0.5 percent to $223,900 when compared with the same month last year.

It’s the second time in three months that home prices have dropped, but it might not be the last.

“With 6,800 homes on the market, and the median price going down, I would think we’re going to see more of that until this evens out, as much as I hate to say it,” said Joe Clement, a veteran local real estate agent and owner of Re/Max Properties in Colorado Springs.

The area needs more jobs and more soldiers arriving at Fort Carson to absorb the inventory, he said. Another big help for the market, albeit an unlikely one, would be a reduction in mortgage rates to about 5 percent.

Last week, the average Colorado home loan (30-year, fixed-rate) came in at 6.67 percent. There were two other pieces of bad housing news Monday.

Single-family building permits in El Paso County, a measure of construction activity, fell 23.5 percent in June and 37.5 percent for the first half of the year, according to the Pike Peak Regional Building Department.

The construction industry employs thousands of carpenters, electricians, plumbers and the like, and some builders have laid off workers over the past several months because of the housing downturn.

Also, governments potentially will see shrinking revenues because of the housing slowdown; they rely on sales taxes collected on the purchase of lumber, drywall and other building materials to help pay for police protection, road repairs and park maintenance.

Meanwhile, El Paso County foreclosures for the first half of 2007 jumped to 1,708, a onethird increase over the same period last year, according to the El Paso County Public Trustee’s Office.

More Colorado mortgage foreclosures also potentially mean more homes put back on the market for sale, which could hurt prices.

Springs economist Dave Bamberger said too many homebuyers jumped into the market in 2004 and 2005 to take advantage of rock-bottom home loan rates, greatly reducing the number of buyers in today’s market.

But what the housing market is going through is a correction, not a collapse, he says.

In the late 1980s, huge inventories of houses for sale triggered deep cuts in housing prices; we’re nowhere near that sort of price depreciation.

Also, record-setting numbers of foreclosures in the late 1980s hurt the housing market even more - they were spread out over about 150,000 fewer homes.

Bamberger said he doesn’t expect an improvement in the housing market until 2008. Until then, however, consumers are in a good position.

Sellers must lower their asking prices from prospective home mortgage applicants and get their homes in top condition or risk a long wait.

SOURCE: Colorado Springs Gazette