Colorado Springs-area home construction has ramped up in recent years, and single-family home building permits in 2020 fell just shy of 4,500, the highest in 15 years.
Even so, a shortage of new and existing homes in Colorado Springs and a furious demand for housing have driven up prices to record levels.
Colorado Springs' housing market remains red hot, with strong sales of resale properties and new construction at its highest levels since before the Great Recession.
Still, a shortage of homes for sale and record-setting prices have frustrated buyers, especially first-timers who real estate agents say can't afford to get into the market.
Median home prices in Colorado Springs set a record high of $425,000 in April, while new construction activity for the first four months of 2021 is running nearly 25% ahead of last year. Despite the strength of the housing market, many buyers are frustrated by rising prices and a shortage of homes for sale, especially on the resale side of the market.
Colorado Springs' hottest housing market in years continues to also be one of its most frustrating.
Single-family homes sell briskly, property owners enjoy double-digit appreciation and builders are busy — trends that have helped the local market rebound after prices plunged, foreclosures soared and sales slowed following the Great Recession.
That's the good news.
But many buyers can't find a home because of a shortage of properties for sale and, when they do, they often can't compete with other house hunters unless they pay thousands of dollars above a seller's asking price. Bidding wars are common and the supply of low and moderately priced houses for sale continues to shrink, which increasingly puts homes out of reach for entry-level and first-time buyers.
Colorado Springs 'housing crisis' threatens employers and economy, business leaders say
"It's no fun seeing these young families not being able to get a house," said Joe Clement, broker-owner of Re/Max Properties in Colorado Springs.
Some business leaders, meanwhile, worry that high prices and a lack of affordability have created what Colorado Springs Chamber & EDC president and CEO Dirk Draper recently called a "housing crisis" that could chill economic development efforts and the overall economy.
"If we aren't talking about it as a community and trying to make sure that we remain accessible and competitive ... it is going to have long-term consequences," Cecilia Harry, the Chamber & EDC's chief economic development officer, said of high housing costs and affordability.
As Colorado Springs and the Pikes Peak region head into Memorial Day and the start of the traditional summer homebuying and selling season, here's a snapshot look at the local housing market:
• A lack of homes for sale remains the market's biggest problem.
Low mortgage rates — recently hovering around 3% nationally for 30-year, fixed-rate loans, according to mortgage buyer Freddie Mac — have helped propel demand for housing.
Colorado Springs' population growth, a healthy economy that's recovering from the COVID-19 pandemic and desirability as a place to live have contributed to a homebuying frenzy. Denver-area residents who've sought to escape high home prices also are part of the buyer mix — moving to Colorado Springs and northern El Paso County and commuting to their jobs.
Despite the demand, the Springs continues to have a shortage of homes for sale — a problem shared by many cities and one that's been building for years and grown worse in recent months.
Clement said a reduction in home construction nationally, which began in 2010, laid the groundwork for today's shortage; many builders scaled back production to reflect slower demand after the Great Recession and because lenders sought to avoid loans for speculative building, according to a 2019 report by the Joint Center for Housing Studies of Harvard University.
Locally, permits for construction of single family homes in Colorado Springs and El Paso County — an indicator of the pace of building activity — hit a record high of 5,314 in 2005. But permits then slid for the next few years before dwindling to just 1,105 in 2009, according to Pikes Peak Regional Building Department reports.
Annual building permits since have risen over the last several years, and climbed to just shy of 4,500 in 2020. Through April of this year, single-family building permits were up nearly 25% over the same period in 2020.
But the Springs' housing shortage isn't just about a slowdown in home construction.
Soaring material costs create sticker shock for Colorado Springs homeowners, builders and contractors
Over the last several years, many homeowners who might want to move up or downsize haven't put their homes up for sale because they worry they won't find another property to buy, real estate agents have said.
As the COVID-19 pandemic took hold in 2020, some owners also didn't want to sell for fear of having strangers walking through their homes, agents have said.
The result is a shrinking supply of homes on the resale side of the market that plunged to a record low of 460 in January, a month when inventories often topped 3,000 in pre-Great Recession years.
Last month, the supply of homes for sale edged up to 557, still less than a half-month's supply, based on recent buying trends, the latest Pikes Peak Association of Realtors report shows. A year earlier in April 2020, there were 1,589 homes on the market; five years ago in April 2016, the supply of homes for sale was almost 2,100.
"There's a fear factor right now," Clement said. "They'd like to move. And some of it is moving down. They had 6,000 square feet; they want to move to 3,000 square feet. But they don't see it (available homes). And so they don't put the 6,000 on the market. They just say, 'we'll just stay here.' So we end up with 650 homes for sale instead of 1,600, or whatever. It's not good."
The fierce demand and home shortage have pushed prices to record highs.
The median price of area homes sold in April spiked to $425,000, the 10th record high in the last 16 months, according to Pikes Peak Association of Realtors figures.
A yearlong surge in lumber prices and other building material costs also have driven up new home prices.
The lack of homes in lower price ranges is especially troublesome, real estate industry members and business leaders say.
In April 2020, nearly 64% of the 1,219 homes sold that month were priced at $399,999 and under, Realtors Association figures show.
Flash forward to this year. Of the 1,489 homes sold in April, just 38.3% went for $399,999 or less.
Not surprisingly, when lower priced homes come on the market, there's a stampede.
Clement, of Re/Max Properties, said a home with an asking price of $240,000 was recently listed by one of his brokerage's agents. In just two days, the home had 110 showings, which produced 22 offers. The seller accepted a bid of $285,000.
"It was like In-N-Out Burger," Clement said of buyer interest in the home. "There must have been a line with cars just pulling up. God almighty. But the sad part is 22 people tried to get it, and one person got it. One couple got it and 21 others that bid on it didn't get it. But 110 looked at it. Where do they go?"
Even higher priced homes see plenty of demand these days.
Bruce Betts, broker-owner of Re/Max Advantage in Colorado Springs, said a client recently listed a home for $640,000. Over four days, there were 62 showings for the home. The seller received more than a dozen offers — and sold the home for $701,000, which was $61,000 above asking price.
"We're seeing multiple offers in all price ranges," Betts said. "The only exception to that might be over $900,000, over $1 million. But sometimes even then we’ll see it."
The seller's market has led to several changes in how purchase contracts are structured, Betts said.
Buyers often will include escalation clauses in their bids — offering to top anybody's else offer by perhaps $5,000, he said. Or, if a home appraisal comes in lower than a contracted price, the buyer will agree to bring cash to the table and make up the difference. Buyers also might submit a backup offer, seeking to be next in line in case a primary offer falls through.
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