Head Count Up- Bag Count Down!
We are well into the summer tourist season, past the Memorial Day and July 4th holidays. The first half of 2012 is now in our rear view mirror. The local economy has produced mixed results thus far, with some improvements in sales tax and lodging tax receipts and a slight increase in reported employment figures. In informal discussions with Main Street merchants, several have commented that the head count is up but the bag count is down, indicating that perhaps we are seeing an increase in the number of visitors, but their spending is restrained. Given the choppy and fragile economy, cautious spending behavior should be expected. This is likely to be the case until real growth in non-government employment improves consumer confidence.
Fortunately, some of our visitors and vacation home owners have decided the present real estate buying opportunities are too good to pass up. With savings accounts paying less than 1%, bond market returns generally disappointing and mixed results from the stock market, some investors have chosen to place a portion of their funds in real estate here in Southwest Colorado. In many cases, buyers are acquiring improved properties far below replacement cost, and commercial land and buildings at a fraction of where prices were just a few years back. Some investors are purchasing lender-owned properties, others are purchasing from private parties exiting the market with a substantial penalty rather than waiting for conditions to improve.
The Risk Takers are the first to recognize and capitalize on opportunities before the greater number of investors and consumers confirm the positive momentum of the market. They scoop up properties early while the crowds are still on the sidelines. They require and are rewarded with greater returns on their investments. More
cautious investors trade greater returns for lower risk, each party establishing the risk-return ratio they are comfortable with. Both are essential to the market, and each complements the other in a recovering economy.
For those with the necessary level of risk tolerance and some discretionary investment cash, there are substantial opportunities for growth and profit within the present real estate market here in Pagosa Springs as well as Durango, South Fork and Creede. If these opportunities interest you, please give me a call or drop me an email.
Pagosa Real Estate Summary
It is interesting to hear the different opinions and feelings of where things are in the local real estate world. Often opinions are based on the local rumor mill and a few isolated and invalid samples from the total market activity. In this report, the facts are presented. The Total Closed Sales Volume for “All Classes” of real estate for the first half of 2012 increased 4.3% over the first half of last year. Closed Sales for the first half of 2012 totaled $41,970,380 as compared to $40,248,597 for the first six months of 2011, an increase of 4.3%. The total number of properties sold was
228 versus 194, an increase of 17.5%.
The Median and Average prices for “All Classes” of real estate have declined when compared to the figures reported for the first half of 2011. The market reported more units sold, and more total dollar volume, but declining prices. The average and median sales prices were down 11.3% and 3.5% respectively. “All Classes” includes single-family detached, multi-family, manufactured homes, building lots, land, ranches, farms commercial, etc. So, for the broad measurement, sales were up, but prices were down.
The current pattern is somewhat expected as the market is clearing out distress properties and bank-owned real estate ahead of firming up values and returning to a more sustainable rate of appreciation, in line with normal supply and demand components. The speculative home building portion of our local real estate market has effectively evaporated during the last four years. The supply side of the housing equation has not increased during the downturn, and this factor will have a more significant and positive impact on pricing when the market enters a stronger recovery phase.
Home Prices, Sales and Inventory Levels
Sales of Single Family Detached Homes are down for the first six months of 2012 as measured to the first half of 2011. This category of real estate comprises approximately 70% of the total dollar volume of real estate transactions within the county, certainly the most significant benchmark to monitor.
Closed Sales totaled $30,028,674 versus $36,190,345 for the first half of last year, a decline of 17%. The number of single family homes sold during the first half of 2012 was 113, as compared to 115 for the first half of 2011. A closer look at the numbers also shows the Average and Median prices for single family homes have declined as compared to the first six months of 2011. During the first half of last year there was one sale that skewed the figures slightly upward. That was a sale reported at $3,125,000. By removing that sale from the total and also removing the highest reported sale for the first half of 2012, the total Closed Sales Volume is still down over 13%.
Closed Sales 1st Half of 2012 & Supply of Homes by Price
$150,000- $250,000- 37 sales, 117 active listings, a
19 month supply.
$250,000- $500,000- 35 sales, 160 active listings, a
27.4 month supply.
$500,000- $750,000- 8 sales, 58 active listings, a
43.5 month supply.
$750,000- $1,000,000- No sales reported for
the first half of 2012 with 31 active listings.
$1,000,000- $1,250,000- 2 sales, 9 active listings,
a 27 month supply.
$1,250,000- $2,000,000- 1 sale, 29 active listings, a
174 month supply.
$2,000,000+ No sales reported for the first
half of 2012 with 15 active listings.
As the above figures show, some price ranges are significantly more over-supplied than others. For homes priced above $1.25 million there is a huge surplus of inventory. Sales in the upper price range often compete with new construction, where a very affluent client will prefer to have a home built to their specific plans on land of their choosing rather than acquire another owner’s dream home, even when the cost differential is quite substantial. They choose this route because they can.
This is still a strong Buyer’s market as the transaction data conclusively shows. We continue to see an increasing number of Buyers from Texas and fewer Buyers from California. The Arizona housing market is improving, as is the employment picture there, so we may see more folks returning to Southwest Colorado from that state in the months ahead.
If you would like additional details on the local real estate market or have questions about anything presented in this report, drop me an email at MikeHeraty@frontier.net, call me at 970 264-7000, or drop by our office- Pagosa Source Real Estate Advisors at 286 Pagosa Street, Pagosa Springs, Colorado.
Note: Data presented was obtained from CREN MLS and internal real estate database records. Home Sales and Inventory figures exclude manufactured homes, condos, townhomes, duplexes and timeshare units. Contact Pagosa Source Real Estate Advisors for additional information.