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Michael Heraty
Managing Broker
    Years of Experience: e-Pro Certification

    ABR: Accredited Buyer's Representative
    CRS: Certified Residential Specialist
    MRE: Master of Real Estate
    GRI: Graduate REALTOR® Institute

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Pagosa Springs, CO Housing Market: 3rd Quarter Real Estate Snapshot

Tuesday, October 13th, 2009

Not much in the way of good news to report after reviewing and analyzing the real estate figures for the third quarter of 2009. Our market, like much of the economy, continues to struggle, with too much inventory and too few buyers. Though mortgage money is still available to qualified borrowers as well as tax credits for first time home buyers, there has not been an abundance of buying activity. The number of foreclosure filings continues to be troublesome as eventually many of the defaults that are not cured will end up as bank-owned properties, competing with private parties for a limited number of buyers. Until the foreclosure inventory clears, its downward affect on property values in our area will continue. We are fortunate when we consider how other larger communities have been impacted to a much greater degree by distressed properties. Still, we feel some of their impact in that in past years, many of our second home buyers came from communities within Arizona and California, and that flow of buyers has dropped off considerably.

Looking for some positive factors, we can see that the dramatic downturn in building permits for new homes will keep the inventory of unsold spec homes from growing. Few builders are brave enough to build out of pocket in this market and very few lenders are presently willing to finance speculative building. When demand does begin to improve, Pagosa should be in a position to respond fairly quickly. We still have a good inventory of resort lots and small acreage homesites, and with demand having stalled out, some of the land values have declined to more supportable levels.

As can be seen from the table below, the number of closed sales and total dollar volume for the third quarter was down significantly when compared to last year. When you review the next table, 3rd Quarter YTD you see that the Year to Date figures show an slightly more negative trend, with both the number of closed sales and total dollar volume off slightly more.

Comparison of 3rd Qtr Stats 2006-2009

Sales

Average

Median

Time Period

Closed

Change

Selling Price

Selling Price

Total Volume

Change

3rd Qtr 09

99

-23%

$                  215,312

$                  167,800

$                     21,315,974

-41%

3rd Qtr 08

128

-20%

$                  283,826

$                  176,250

$                     36,329,826

-15%

3rd Qtr 07

161

-43%

$                  266,656

$                  175,000

$                     42,931,644

-34%

3rd Qtr 06

280

$                  233,192

$                  176,950

$                     65,293,862

The next table displays the closed sales and total volume for the 3rd Quarter YTD, going all the way back to 2004. This shows the dramatic downward slope we have been on from the peak period of 2005 when there were a total of 363 single family homes sold by the end of the third quarter representing total sales volume of over $94 million, as compared to 104 sales and $31.4 million thus far this year.

Comparison of YTD Totals at End of 3rd Qtr Years 2004-2009 All Classes

Sales

Average

Median

Time Period

Closed

Change

Selling Price

Selling Price

Total Volume

Change

9/30/2009

205

-33%

$                  195,139 $                  166,500 $                     40,003,510

-52%

9/30/2008

307

-34%

$                  273,386 $                  195,000 $                     83,929,735

-24%

9/30/2007

466

-40%

$                  237,401 $                  157,000

$                   110,629,234

-42%

9/30/2006

779

71%

$                  245,735 $                  160,000

$                   191,428,112

75%

9/30/2005

455

41%

$                239,826

$                198,000

$                109,121,050

38%

9/30/2004

322

$                246,408 $                174,000 $                  79,343,414

The next table below shows the YTD Totals for Single Family Homes. These figures are fall detached, stick built homes. Considering the total single family sales volume for the current YTD is down nearly $63 million as compared to where the figures were in 2005, the financial ripple effects have been substantial. In addition to the loss of income among builders and others in the construction trades, we have the material suppliers, the surveyors, the title companies, the insurance companies, the real estate brokers and all the support staffs. You can further project how their reduced income translates to declining spending and investments throughout our community.

Comparison of YTD Totals at End of 3rd Qtr Years 2004-2009 Single Family Homes

Sales

Average

Median

Time Period

Closed

Change

Selling Price

Selling Price

Total Volume

Change

9/30/2009

104

-26%

$                  301,891 $                  256,650 $                     31,396,751

-47%

9/30/2008

140

-8%

$                  419,864 $                  291,000 $                     58,780,976

7%

9/30/2007

153

-40%

$                  360,643 $                  300,000 $                     55,178,380

-38%

9/30/2006

253

-30%

$                  353,634 $                  275,000 $                     89,469,485

-5%

9/30/2005

363

23%

$                  259,676 $                  210,000 $                     94,262,729

24%

9/30/2004

294

$                  258,318 $                  178,000 $                     75,945,440

Many are searching for a way to survive and reposition ourselves while the market determines which way it will go and when it will change directions. Is it a good time to sell? That depends. Are you going to take your money and reinvest it in real estate in another market where prices have dropped to super-attractive levels? If you sell your property here now, will you look back in a few years and feel you left money on the table? Who knows? What seems sensible, for many, may be to wait things out. However, if selling your property here now enables you to achieve or reach closer to another worthwhile goal, why put things off and risk that you made the wrong bet?

I think the demand for the quality of life, exceptional natural beauty, and abundant recreational opportunities our area offers will return. When the economy in general improves, Pagosa will again stand out as a more financially sensible alternative to more well- known mountain resort areas. It is my belief that when the economy improves, buyers will remain more value focused. So long as we as a community retain a positive outlook, a tourist friendly attitude, practice sound fiscal management and continue to make tangible improvements to the infrastructure and amenities of our area, Pagosa will do just fine. Until then, there will likely be a few more bumps in the road.

Our real estate analysis also included the single family homes of $1 million and higher. If this market is of interest to you, let me know, I would be happy to share that information.  As our office has participated in a large number of high-dollar transactions over the last five years, we watch this category carefully and continuously. There have been some interesting trends recently. If you would like specific details of any portion of our real estate market, please give me a call at 970 264-7000, or email me at mikeheraty@frontier.net

Mike Heraty is the Managing Broker and Owner with his wife Lauri of Pagosa Source Real Estate Advisors. He has more than 36 years of diverse real estate industry experience including 15 years in Pagosa Springs. He is Pagosa’s only Certified Real Estate Brokerage Manager, his other professional designations include: Certified Residential Specialist, Accredited Buyer Representative, Senior Real Estate Specialist, Certified Sellers Representative, Master of Real Estate and Transnational Referral Certification. Mike has served as President of the Pagosa Springs Association of Realtors and four terms as a Vice President of the Colorado Association of Realtors. Mike can be reached at 970 264-7000.

1st Quarter 2009 Real Estate Market Update

Thursday, April 2nd, 2009

The Pagosa Springs inventory figures continue to show a significant oversupply in all categories, with land being the most out of balance. We are expecting more properties to come onto the market during the next 60 days as we approach the summer selling season. We reviewed the year to date figures for single family homes as well as land. As of this date there are 973 land listings on the market and 388 single family homes. During the last 12 months, a total of 163 homes were sold, and 122 land sales closed. If the absorption rates for the last 12 months hold, we now have nearly a 2.5 year supply of unsold homes and about a 7.8 year supply of unsold land.

Our 1st Quarter Summary Charts are shown below. The number of land closings in Pagosa Springs is down 30% from last year while the total dollar volume is down by 44%. Looking at the single family home closings, (the figures exclude condos, townhomes and manufactured homes) we see that the number of closings is down by 32% while the total dollar volume is down by 57%. As discouraging as these numbers appear, Pagosa Springs is still not in as bad a shape as other communities where overbuilding and speculation caused significantly more damage to the market. We have also not experienced the high level of foreclosures other areas have seen and as a result we have not seen values driven down, instead, the number of days on the market has increased as well as the amount of listing inventory. All these figures are bad news for Sellers, but good news for Buyers that have a down payment and good credit. There are a lot of properties to choose from and there is plenty of mortgage money available. These figures also make it apparent that serious Sellers will have to price their properties very aggressively in order to be attractive to the limited number of Buyers that are moving forward under the current market conditions.

After reviewing the market data as well as many articles and analysis of the conditions within the housing industry, we are challenged to make a projection of how many homes will sell within our area in the year ahead. Our best guess is that we will do well to equal the number of homes that were sold last year. Achieving that level assumes that something in the federal stimulus package will help to jump start the housing market. We know we still have lots of folks that would like to buy a place here in Pagosa Springs, but they can’t, until they sell something in another market. Unfortunately, a lot of those folks are in markets that have yet to reach bottom—Phoenix, California and South Florida. Still, rather than wait until our market bottom is clearly defined, we think it is wiser to make a selection while there are many choices and few competing buyers. So long as you are going to hold your property for a minimum of 3-5 years, we don’t see the potential for an additional downward adjustment of 5-10% as being especially frightening. As I have stated in earlier articles, if you are looking to buy a property to flip in this market, keep your money in your pocket. If you are looking to buy so that you can begin to enjoy the natural beauty and lifestyle our area offers, the time is right. Call us for details on any part of our real estate market. Review the charts we have provided, and let us know if you have any questions or comments. Thanks for reading our articles!

Mike Heraty ABR, CRB, CRS, CSR, GRI, e-PRO, MRE, SRES
Managing Broker/Owner

Has Pagosa Springs Hit the Bottom?

Monday, January 26th, 2009

The Pagosa Springs real estate market, like all others, is cyclical. It goes through cycles, swinging from a seller’s market to a buyer’s Market and then back again. What we know from economic history is that we have a cyclical real estate market, what we can’t pin point, is when the shift begins or ends here in Pagosa Springs. In reviewing the Pagosa Springs real estate Market numbers, we know that we have been is more of a buyer’s real estate market for about two years. We also know that our strongest seller’s Market in Pagosa Springs was the period from 2004-2006. You can look at the transaction volume and dollar volume during those years, as well as the appreciation rates and clearly see that was the top of the most recent seller’s market cycle for Pagosa Springs. In reviewing the Pagosa Springs real estate market statistics we also know that buyer’s markets have typically had shorter runs than seller’s real estate market in Pagosa Springs.

At present, some of our categories seem to be settling, in terms of growth of inventory, while others are still growing. We have not seen the level of price declines as experienced in other real estate market such as Phoenix or Las Vegas. Instead, in Pagosa Springs, the time on real estate market grows. Discretionary sellers have been unwilling to “mark to market” in order to move their property, instead preferring to wait out the Pagosa Springs real estate market until prices improve in their favor, thus, the average days on market grows.

At the same time, we have seen a dramatic increase in the foreclosure activity in Pagosa Springs. During 2008 there were 130 foreclosure notices files with the county. In 2007, there were only 42, much closer to the long term average. As foreclosure homes enter the Pagosa Springs real estate market as bank-owned real estate, (“REO”) they will have a negative drag on prices. We are hopeful a good number of these owners will be able to modify their mortgage terms and stay in their homes. That is better for all parties.
We really don’t know if we are at the bottom of the cycle here in the Pagosa Springs real estate market yet. Again, in reviewing inventory and absorption levels, some property categories may be closer than others. You should call us to discuss that part of the real estate market that is of interest to you. We can go over the rate of sales and the growth or decline in supply. We do know that the Pagosa Springs real estate market conditions are certainly more favorable to Buyers in Pagosa Springs than they have been for a long time. We suggest you call us to discuss your real estate objectives and to benefit from our many years of real estate experience. The current real estate ride in Pagosa Springs is a little rough, but as the saying goes, “this ain’t our first rodeo”. Choose to work with us, our experience and expertise will help smooth out the road.

Pagosa Springs Real Estate Market Recap 2008

Wednesday, December 31st, 2008

Like most areas of the nation, Pagosa Springs real estate market experienced some changes in 2008. Overall, Pagosa Springs real estate market activity declined, both in the number of transactions and in the total dollar volume. What is interesting is that the Pagosa Springs real estate market actually performed better during 2008 than most of its neighbors. For our region of SW Colorado, the number of single family home closings was down by 24%, and by 23% based on total dollar volume as compared to 2007. For Pagosa Springs, our number of closings was down by only 10% while our total dollar volume declined only 7% over 2007. Durango was down 20% in both transaction and dollar volume, with Grand Junction down 23% and 22%. We think this is in part due to the fact that 2007 was a tougher year for Pagosa Springs real estate market as compared to other towns within our region. It may be that the worst of the real estate impairment is behind us.

What we are seeing now is a slight increase in the number of foreclosures, and an increase in the number of homes that are pricing more aggressively. This is good news for Buyers that are looking for good values in Pagosa Springs real estate market. We have found some of the best values are actually not within the bank-owned inventory of homes, and sometimes are not even within the MLS inventory. We have uncovered great hidden values among a small group of owners that are anxious to sell, but, for various reasons have not chosen to place their homes on the open Pagosa Springs real estate market. The other trend that is good for Buyers is the increasing number of Sellers that are willing to provide purchase financing. With a strong down payment, even a Buyer with some past credit challenges can find good financing among some of our Sellers. Give us a call to discuss your needs and objectives you may have in the Pagosa Springs real estate market.

Market Recap

  • Avg. Sales Price: $258,000

  • Avg. Days on Market: 230

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