Are we facing another housing crash?
The general public has been saying this since 2013-2014, because to them it's been "too long" since the last housing crash, and for as good as it's seemed to be in the recent years, people are thinking it's too good to be true, and that it can't stay that way.
And yeah, the market is cyclical, I get that. So yes, technically we should be due soon/ish for a downturn. It's just not going to happen anytime soon.
We've been hearing from these same people in 2018, that 2019 was going to be the housing crash, and then in 2019, it was going to be 2020, and although 2020 was such a devastating and shocking year, it made a ping-pong sized dent in the great seller's market, especially in Colorado Springs.
Here's why the housing market in Colorado Springs is still crazy good, and will continue to be good in 2021, despite why that seems like it shouldn't be:
Rabbit trail: Google Map of Colorado Springs. Have fun!
There can only be a housing crash when people don't want to buy homes, and that typically happens when a) the economy sucks, and/or b) mortgage interest rates are high (double digits).
A housing crash can be worsened if there are a lot of homes available in an area.
With a housing crash, having lots of inventory is even worse now. Colorado Springs has such a low inventory of homes available for sale, combined with so many people wanting to move here, that there can never be too many homes available in Colorado Springs.
TL;DR: low inventory+low interest rate+high demand = great housing market
great housing market - COVID-19 economy = still pretty great housing market
If you really thought the market was going to crash, you'd sell your house now to take advantage of the downturn, and then buy after the crash. The housing market has ups and downs, as it always has, but long-term, it's a great investment.
The best time to buy is right after a crash, provided you can, but the next best time to buy is today.
Why do people love Colorado Springs so much?
Other than the dry climate, which is great for some health conditions, we have the high altitude, and high and dry means fewer bugs, and just a dry climate, so fewer water-based issues, like your car rusting, that’s not a thing here because we don’t live near the ocean.
We also have great views of the Rocky Mountain Range, and lots of forests, hiking, skiing, snowboarding, and other opportunities.
You already know why you like Colorado Springs, but here’s what else you may not have thought about that affect our city:
We have five military bases in Colorado Springs, so we get lots of transit traffic from the constant PCSing of the armed forces. If there is a large base of people getting stationed here for a few years at a time, then it directly affects the movement of housing, as well as rentals, and it keeps a healthy natural supply and demand for the city.
Neighborhood Scout notes:
Colorado Springs has more people living here who work in computers and math than 95% of the places in the US.”
Again due to our military presence, we have a larger than usually demand for IT/Cybersecurity jobs. Other than the DOD and the DOJ, we also have non-government IT/Cybersecurity jobs. These all require mastery of math and computer technology topics, as well as certifications and security clearances, so this would explain the large amount of computer/math savvy workforce in Colorado Springs.
Neighborhood Scout conjectures about the ideal professional candidate for residency:
“Colorado Springs is one of the most attractive larger cities for people who are young, single, educated, and upwardly-mobile career starters. This makes it a good place to live for young singles in their 20s and 30s and who have undergraduate or graduate degrees and are starting their professional careers. Although Colorado Springs is a large city, this demographic is significant enough that young professionals will find many others like themselves here, with really good opportunities for friendships, recreation, romance, and more.”
The State of Colorado offers certain business incentives that make the state more appealing than others to start a business in. Incentives include: tax credit, business grants, debt and equity, and cash incentives, among other things.
Colorado Springs has its own additional benefits to businesses: no state or county sales tax on manufacturing equipment, and no inventory tax.
These incentives are very appealing to all types and sizes of businesses. New business has contributed to the city’s growth and revenue, and continues to do so, as is apparent from new entrants (Amazon’s new distribution center, and the Space Force are a couple).
Covid-19 has admittedly slowed the economy for everyone, and Colorado Springs has been feeling that also, now with currently a 25% capacity allowed for most businesses, and with bars being shut down altogether for now. This means that the in-person shopping has gone down, but online shopping has increased a lot, so we’re not necessarily experiencing as big a slowdown in the economy as we might think.
Colorado Springs businesses that can and have evolved their business format to include online services/products have been doing a lot better. Bars, gyms, and many restaurants have seemed to have taken the biggest hit in this Covid-19 pandemic.
One unique feature of Colorado Springs is how spread out the city is, which requires having your own transportation. Unlike say Denver, it’s not quite so easy to have the ability to walk to work, though in our downtown area, that’s more possible. Neighborhood Scout has this to say about Colorado Springs specifically:
“One important feature of Colorado Springs is that it is one of the most car-oriented large cities in the country. In fact, 83.69% of people commute to and from work every day by private automobile, eschewing alternative forms of transportation, which are not widely available in Colorado Springs anyway. So, if you like to drive, Colorado Springs is the city for you! The landscape around Colorado Springs reflects this: wide streets, parking lots, plenty of highways, malls, and shopping centers are what you'll find.”
The early designs of the city did not allot for efficient space, and that means now that it would be expensive and near impossible to set up mass transit at this point, making regular personal transportation necessary in order to commute to work.
Future Housing Developments in Colorado Springs
Saul Levy, a director with the Denver office of Newmark Knight Frank Multifamily, points out a few factors that, according to Laden (2020), are the reason for the apartment housing demand in particular:
Ryan Heeter, chief operating office of GE Johnson Construction in the Springs, lists some of the high-profile projects, according to Laden (2020):
A new 147-acre Grandwood Ranch subdivision just outside Monument was approved in November 2020, which will allow for the construction of 48 single family homes, with lots at a minimum of 2.5 acres each.
Other Colorado Springs Real Estate News
The first forbearances filed in April 2020 will be up next April, leading many to speculate about possible foreclosures in Colorado Springs for 2021. With most homeowners recovering from and adapting to the recent economic change according to the data, it is unlikely that we will be seeing much, if any, foreclosure activity.
There is an upcoming railroad improvement project, projected to cost $42 million, will not start until 2025. Some residents and businesses will be displaced for this project, but will be compensated, not sure about what kind of a value the city might be giving them.
The Comanche Solar Project is a field of solar panels 8 miles south of Pueblo. Once investors and companies realized that solar is becoming cheaper than natural gas, they started investing in these kinds of projects, and because Pueblo is one of the sunniest places in the country, it made the location selection very easy. Pueblo also has the Vestas wind turbine tower factory.
I think we in Colorado Springs will see future benefit from being so close to that kind of technological development. I also think that this will be of even greater benefit to the people of Pueblo, as this not only offers more jobs, but the potential for additional future jobs if solar and wind turbine power technological developments continue.
Colorado Springs Utilities is also partnered with a solar company, which allows customers to purchase and use solar panels, which can help offset the total utilities costs. I can only see the quality of solar panels and the ability to have a zero utility cost a real possibility in the near future.
Oh, the city of Colorado Springs got sued in 2020 for 12 million, from improper stormwater disposal from city projects, mostly in Fountain. They managed to get the fine down to 2 million, but that fine will be billed to residents over the next few years, not sure where exactly. Gee, thanks Mister!
One benefit of Covid-19 is that working remotely opens up options for where people can live, making more real estate markets suddenly that much more desirable (like Pueblo!).
Distance learning for kids also means office/work space in houses will be in renewed demand, so expect homes that can offer at least a separate work area to be given a premium value.
Colorado Property Taxes Increasing?
The passing of the 2020 Colorado Amendment B (Gallagher Amendment) means that the residential property tax rates for Colorado are no longer slowly decreasing automatically, and Coloradoans now have the ability to vote on residential property tax increases to help offset the state budget.
Colorado may see increases in residential property taxes in the future, so the low residential property taxes that is part of the draw in Colorado may not be an incentive later on.
Any increase in property taxes also means that apartments, townhomes, and home rentals would also see property tax increases, which would very likely be a cost passed on to the renter in the form of a rent increase. This means potentially even higher rental rates for Colorado Springs in the future.
Interest Rates/National Changes:
Mortgage interest rates were at an average of 2.78%, as per 11/5/2020. That's down from the average of 3.95%, as per 1/4/2020.
The Federal Reserve locked the interest rates until 2023 in order to keep the economy moving. The COVID-19 pandemic slowed people from selling, which in Colorado Springs just made the seller's market that much stronger.
The GDP has shot back up in the third quarter of 2020, according to the limited information gathered so far, so we've already seemingly seen an economic correction in our national economy.
Active forbearances have also decreased over the year, so it's extremely unlikely that we have any sort of foreclosure crisis in the future.
The months inventory of homes is also still low, at 2.7 months of national inventory for September 2020. For Colorado Springs, we have 0.8 months’ worth of housing inventory.
Biden Presidency, how that affects Real Estate?
Still too early to tell what a Biden/Harris duo will mean for the future of the housing market in 2021, but from what I do know of what Biden has said in the past, is that we may see more/stricter regulations in the appraisal industry. Kamala Harris also has made mention of reparations for Black Americans, which if actualized, could have an affect on the housing market.
The Color of Law, written by Richard Rothstein, covers racism in the housing industry, particularly where governmental regulation is concerned. Rothstein was asked in a lecture what reparations could look like, and he had mentioned as a sort of a “draft” example, the government buying say 25% of a new development, for say 400k per property, and selling them to Black Americans for 100k. He also said it wasn’t necessarily the best answer or approach, just an idea to start with.
Regardless, it would create a new influx of buyers who now have a much better ability to afford a home, which, in Colorado Springs, would mean an even more severe sellers’ market as sellers have even more offers to choose from. Great for a booming city’s economy, bad for any current buyers, as more competition means more difficulty in finding a house. Still, the housing market in Colorado Springs rages on, as demand for more housing in the city continues. The 2021 real estate market in Colorado Springs will continue to grow, and it doesn't look like anything is going to stop it.
If you have ideas about what's in store for real estate in 2021, especially in Colorado Springs, please post a comment, and share your knowledge with the world!
To learn more about what's going on with real estate in Colorado Springs, visit my dedicated site to my real estate business at www.kevinjamesbond.com.
Mortgage Interest Rates:
Projections on Home Prices Appreciation:
www.zelmanassociates.com (subscription required)
Colorado Springs Economy:
Bureau of Labor Statistics. (09/03/2020). Colorado Springs Area Economic Summary. Retrieved from the Bureau of Labor Statistics website: https://www.bls.gov/regions/mountain-plains/summary/blssummary_coloradosprings.pdf
Colorado Springs and Colorado Business Incentives:
ChooseColorado. (09/19/2020). A Repository of Business Funding and Incentives. Retrieved from the ChooseColorado website: https://choosecolorado.com/doing-business/incentives-financing/.
Colorado Springs Chamber & EDC. (09/19/2020). Incentives and Taxes. Retrieved from the Colorado Springs Chamber & EDC website: https://coloradospringschamberedc.com/doing-business/incentives-taxes/.
Future Housing Projects
Harrison, S. (02/12/2020). City council approves affordable housing project in west Colorado Springs. Retrieved from the KRDO website: https://krdo.com/news/top-stories/2020/02/12/city-council-approves-affordable-housing-project-in-west-colorado-springs/
Laden, R. (09/03/2020). Downtown Colorado Springs poised for wave of housing projects. Retrieved from The Gazette website: https://gazette.com/business/downtown-colorado-springs-poised-for-wave-of-housing-projects/article_9d81f1fa-a6ca-11ea-a3fe-fba62256715f.html
Laden, R. (01/23/2020). Experts tout more growth for Colorado Springs residential and commercial real estate in 2020. Retrieved from The Gazette website: https://gazette.com/business/experts-tout-more-growth-for-colorado-springs-residential-and-commercial-real-estate-in-2020/article_0a67bf3e-3e11-11ea-bea3-a769c106b515.html
Middaugh, J. (03/09/2020). More housing coming to southeast Colorado Springs. Retrieved from the KKTV website: https://www.kktv.com/content/news/More-housing-coming-to-southeast-Colorado-Springs-568625441.html
Moix, C. (01/01/2020). How’s the Job Market? Strong and Growing. Retrieved from the Colorado Springs Relocation Guide website: https://springsrelocationguide.com/hows-the-job-market-strong-and-growing/
Local Colorado Springs real estate market data:
Neighborhood Scout (09/06/2020). Colorado Springs CO: Appreciation Rate Trends and Housing Market Data. Retrieved from the Neighborhood Scout website: https://www.neighborhoodscout.com/co/colorado-springs/real-estate.
Months of inventory:
Comanche Solar Project: