HARRY'S BI-WEEKLY UPDATE 1.23.17
January 23, 2017
HARRY’S BI-WEEKLY UPDATE
A Current Look at the Colorado Springs Residential real estate Market
As part of my Personal Service, it is my desire to share current real estate issues that will help to make you a more successful and profitable buyer or seller.
HAPPY MONDAY TO ALL…
It’s a beautiful day here in Colorado Springs and I’m getting ready to present my annual forecast to the City Council this afternoon. I do this on behalf of the Pikes Peak Area Realtors each year and this year I thought you also might be interested in the “State of the real estate Market”. As I’ve been telling you in recent issues, the local real estate market is HOT..HOT..HOT.
Below is the outline of my presentation and a list of the attachments. You can select any of the attachments to download for perusal at your convenience. If you have any questions about my presentation, or any other real estate concerns, please call me at 598.3200 or email me at Harry@HarrySalzman.com .
Presentation to Colorado Springs City Council
January 23, 2017
by
Harry A. Salzman,
The real estate Therapist
REALTOR® Emeritus/CRS, CRP, E-Pro, CNE
ERA Shields/Salzman real estate Services
Overview and Update of Colorado Springs Residential real estate and a Forecast for 2017
This presentation is on behalf of the membership of:
Overview and Update of Colorado Springs Residential real estate and a Forecast for 2017
We all know Colorado Springs is a great place to live. And if you have been in the real estate market or known someone who has bought or sold in the past year, you are aware that the 2016 market was HOT. This tells us that other people think Colorado Springs is special as well.
It’s natural to wonder, “Is this just the beginning of a positive trend?” “Will this growth last?” “What is around the corner?” This afternoon we will discuss the relative strength of Colorado Springs to the U.S. and I will provide a real estate forecast on behalf of PPAR for the Colorado Springs region.
- Homeownership continues to be a reliable and stable method for building wealth. (Exhibit A)
- Wealth-building through real estate, primarily home-ownership, out-performed wealth-building through stock ownership.
- While many Americans remain frustrated by the slow movement of the economy, rising home values present a positive direction.
- Nationally the homeownership rate is at 63.5% (Exhibit B)
- Home prices are projected to continue to rise (Exhibit C)
- Nationally, home prices are projected to rise by 5.2%
- As of September 2016, Colorado had the 3rd largest year-over-year home price appreciation at a rate of 8.6%
- Rising home prices is great news if you own a home, but what if you don’t? (Exhibit D)
- Increasing home prices is a sign of the on-going housing recovery
- Affordability becomes a concern as prices continue to rise
- Some American families will become priced out of homeownership
- Renter households will also rise
- Rental rates increase as demand outpaces rental supply
- Student debt stands in the way of homeownership for young adults. (Exhibit D-1)
- The role of the shortage in housing inventory (Exhibit E)
- The country is short by 8.3 million housing units
- The shortage of housing inventory is the principle reason home prices have been outpacing people’s income growth for the past 5 years
- From 2011 to 2016, the median home price will have risen 42% while the median household income gain will have risen only 17%
- An increase in supply is needed to slow the rate of home price growth
- In order to bring the inventory of homes for sale to a more balanced market, more housing starts are needed
- Economists project a national housing shortage for at least 4 more years
- The role of Confidence on the economy (Exhibit F)
- Post-election market gains and increases in interest rates indicate rising confidence across investors, consumers, businesses, economists, and homebuilders
- Pro-growth policies take time to benefit the economy
- Short-term, rising interest rates and home prices present challenges for home buyers
- Long-term, stronger economic growth results in increased incomes, affordability, and ongoing housing recovery
- Not surprisingly, politics plays a role in consumer confidence. (Exhibit G)
- Republicans tend to feel positive toward the market while Democrats feel less positive
- Colorado Springs ranks 6th in the nation for top housing markets based on political leaning (and therefore market confidence), affordability, and employment opportunity
- Top Housing Trends for 2017 – Realtor.com (Exhibit H) Despite a more moderate housing market nationally in 2017, strong local economies and population growth will continue to fuel the nation’s top markets
- Home prices are anticipated to increase 3.9%
- Interest rates are expected to reach 4.5%
- Colorado Springs ranks #12 of the 100 top metros in forecasted gains in price (4.8%) and sales (6.7%)
- Nationally, western cities continue to lead the nation in prices and sales
- Millennials and boomers dominate the market
- Midwestern cities will continue to be hotbeds for millennials
- Nationally there will be a slowing in price appreciation
- Limited inventory continues to fuel fast-moving markets
- Fannie Mae’s Mortgage Rate Forecast (Exhibit I)
- Fannie Mae anticipates interest rates to increase to 4.2% by year-end.
- Demand for Mortgages Decreases (Exhibit J)
- As mortgage rates increase, demand decreases
- More Good News for Colorado Springs
- Colorado Springs has been ranked #5 in Best Places to Live as ranked by U.S. News & World Report (Exhibit K)
- Ranking based on Job Market, Value, Quality of Life, Desirability, and Net Migration
- Colorado Springs ranked #14 in Hottest Housing Markets by Realtor.com (Exhibit L)
- Buyers and Sellers by the Numbers (Exhibit M)
- Median Sales Price of Existing Single-Family Homes (Exhibit N)
- National Growth: 5.2% appreciation
- Colorado Springs Growth: 8.9% appreciation
- 2016 SFR uses: 200403 in El Paso County, 132763 in the City
- Year End Listing and Sales Statistics (Exhibit O)
- PPAR Monthly Indicators (Exhibit P)
- PPAR Local Market Update (Exhibit Q)
- Colorado Springs, an Economic Update (Exhibit R)
- As of the 3rd Quarter, there was an increase of 22% in building permits for single family, detached homes
- As of the 3rd Quarter, there was a 13.7% increase in year-to-date home sales
- Harry’s Forecast…
- 2016 was the best year ever with 15,319 closings
- I predict 2017 is going to be just as incredible
- Strong job growth, interest rates, and a shortage of inventory will continue to fuel home appreciation and sales activity
- Job growth is the #1 indicator in a strong housing market. It is being predicted that job growth will drop slightly but will still be “very strong” over the next two years
- Amazing interest rates are still part of the equation. While an increase in rates has been predicted, they will still be in the historically low range.
- Median Sales Price expected to appreciate 5 ¾ - 6 %
- Unknown changes from the Federal Government regarding Dodd-Frank
- How long will this hot market last? With strong job growth in the local economy and continued historically low interest rates, expect to see positive price appreciation, albeit at a more reasonable level, starting in late 2017 going forward.
- Now is the time, more than the past, for home ownership.
City Council 2017
Index of Exhibits
- Exhibit A – Article from the Wall Street Journal, 12.9.16, “Household Wealth Rises to a Record”
- Exhibit B -- U.S. Department of Commerce, U.S. Census Bureau, 10.27.16, “Quarterly Residential Vacancies and Homeownership, Third Quarter 2016.”
- Exhibit C – CoreLogic U.S. Home Price Insights Report 9.16
- Exhibit D – RISMedia, 1.1.17, “Housing Value at Record-High: Will Buyers Be Able to Keep Up?”
- Exhibit D-1 – Article from the Wall Street Journal, 1.19.17, “Student-Debt Picture Darkens”
- Exhibit E – Forbes 12.13.16, “Four More Years? No Quick End In Sight For The U.S. Housing Shortage.”
- Exhibit F – Fannie Mae 12.20.16, “Confidence Improves at the Prospect of Pro-Growth Policies.”
- Exhibit G – RISMedia, Housecall Blog, 12.12.16 “Surveying the American Dream: Housing Optimism Swings Post-Election”
- Exhibit H – Realtor.com, 11.30.16, “Realtor.com® Forecasts Post-Election Economy to Result in Higher Mortgage Rates While Housing Delivers Slower Gains in 2017.”
- Exhibit I – Fannie Mae 12.16, Housing Forecast December 2016
- Exhibit J – Wall Street Journal, 1.12.17, “Demand for Mortgages Takes a Hit.”
- Exhibit K – U.S. News & World Report 1.2017, “Best Places to Live” and “Best Places to Live Methodology”
- Exhibit L – REALTORMag, Realtor.com 12.22.16, “Hottest Housing Markets in December”
- Exhibit M – National Association of Realtors, 12.7.16, “The 2016 Profile of Home Buyers and Sellers.”
- Exhibit N – National Association of Realtors 12.16, Median Sales Price of Existing Single-Family Homes for Metropolitan Areas
- Exhibit O – Pikes Peak Association of Realtors 12.16, Listing and Sales Summary
- Exhibit P -- PPMLS Monthly Indicators for El Paso & Teller Counties, Nov. 2016
- Exhibit Q – PPMLS Local Market Update, Nov. 2016
- Exhibit R – UCCS Quarterly Economic Update, Nov. 2016
