Housing Guide / Market Values in Colorado Springs (foreclosures, rental)

[hello-world]

good points to put in one place, bob from down south.

i also thought it might be interesting to get people's perspectives on inflation over last year (wholesale jumped 6% - highest in 26 years) relative to declining home values. does anyone have COS or denver metro inflation numbers? and employment numbers? if they're similar (to 6% inflation, say, and say unemployment inching above 5%, say), and property values are declining, how do we hedge against what these things seem to imply?

does anyone have information on what the economic "safety nets" might be for the region? (projected tourism, or projected industry performance [energy, gov contracting, e.g.], or other good news for the near future?)

[Bob from down south]

One thing I have not seen discussed is an interesting dynamic that I foresee will hit CS particularly hard this year.

The four military bases in town (Ft Carson, Peterson AFB, the Air Force Academy, and Falcon AFS) are often held up by the media and the real estate industry as a strength that will help CS avoid the full fury of the housing depression that's upon us. In the long term, there's probably some truth to that, but...

One of the downsides to a military career is the joy of getting permanent change-of-station orders and moving to another base. These come in a semi-regular cycle of around every 3-4 years, some more, some less--on average probably 20% of the military population moves each year. But when the orders come, you have to move, and the condition of the housing market does not enter into the equation when the military needs you to go.

This summer, hundreds of military movers who own homes will be forced to put their houses into a market starved of buyers due to a return to sane lending standards and other compelling drivers of credit tightening. Those coming in behind them won't qualify for the stuntman loans needed to pay the current high prices, and many won't opt to buy anyway, because it it doesn't make sense to buy a rapidly depreciating asset when you know you have no control of the timing--Uncle Sam can force you to move again and sell into the low in a few years. In fact it often didn't make a whole lot of sense even when the market was going up, due to the high costs of turnover.

These folks don't have an option to send a "jingle mail" to the bank (i.e. put the keys in an envelope and walk away), as things like bankruptcy and foreclosure can get your security clearance yanked faster than a shifty-eyed realtor can say "housing always goes up in value." Some will rent their houses out, but the still-wide differential between rents and cost of owning leaves them in negative cash flow territory if they do, and we don't pay 'em that much to start with...

So, this summer, we should see hundreds of houses owned by moving military members added to the wave of foreclosures and the already massive overhang of unsold inventory. Worse, most of these military folks will have bought in the last 3-4 years--approaching the bubble peak--and aren't going to have a lot of wiggle room to lower prices without resorting to a messy short sale, especially those who bought using the creative kamikaze loans that have proven to be so sheik and stylish during this, the Golden Age of Crippling Debt.

Should add to an already interesting year in the market.

[jazzlover]

Originally Posted by Bob from down south

One thing I have not seen discussed is an interesting dynamic that I foresee will hit CS particularly hard this year.

The four military bases in town (Ft Carson, Peterson AFB, the Air Force Academy, and Falcon AFS) are often held up by the media and the real estate industry as a strength that will help CS avoid the full fury of the housing depression that's upon us. In the long term, there's probably some truth to that, but...

One of the downsides to a military career is the joy of getting permanent change-of-station orders and moving to another base. These come in a semi-regular cycle of around every 3-4 years, some more, some less--on average probably 20% of the military population moves each year. But when the orders come, you have to move, and the condition of the housing market does not enter into the equation when the military needs you to go.

This summer, hundreds of military movers who own homes will be forced to put their houses into a market starved of buyers due to a return to sane lending standards and other compelling drivers of credit tightening. Those coming in behind them won't qualify for the stuntman loans needed to pay the current high prices, and many won't opt to buy anyway, because it it doesn't make sense to buy a rapidly depreciating asset when you know you have no control of the timing--Uncle Sam can force you to move again and sell into the low in a few years. In fact it often didn't make a whole lot of sense even when the market was going up, due to the high costs of turnover.

These folks don't have an option to send a "jingle mail" to the bank (i.e. put the keys in an envelope and walk away), as things like bankruptcy and foreclosure can get your security clearance yanked faster than a shifty-eyed realtor can say "housing always goes up in value." Some will rent their houses out, but the still-wide differential between rents and cost of owning leaves them in negative cash flow territory if they do, and we don't pay 'em that much to start with...

So, this summer, we should see hundreds of houses owned by moving military members added to the wave of foreclosures and the already massive overhang of unsold inventory. Worse, most of these military folks will have bought in the last 3-4 years--approaching the bubble peak--and aren't going to have a lot of wiggle room to lower prices without resorting to a messy short sale, especially those who bought using the creative kamikaze loans that have proven to be so sheik and stylish during this, the Golden Age of Crippling Debt.

Should add to an already interesting year in the market.

A very astute observation in my opinion. One other factor about Colorado Springs is its heavy reliance on the military and military-related industries for its economic well-being. So far, that has worked out well for them--they have actually benefited from base closures elsewhere (with consolidation bringing more troops, etc.) to Colorado Springs. Assuming that trend will continue, though, I believe to be a very dangerous assumption. In fact, I think that just the opposite is quite likely to occur in the years ahead. As far as sheer numbers of military personnel, I think we will see a massive permanent shift of forces to the south--to near the US/Mexico border--as the economic situation in both the US and Mexico deteriorates. Mexico will be desperate--the biggest thing propping its generally moribund economy has been oil production--many experts estimate that Mexico won't even be able to meet its own petroleum needs within the next 5-7 years. Their fields are declining that fast. That will unleash a massive migration of desperate people toward the US--the US will not be able to ignore that huge threat to its economy and national security any longer. Thousands of US troops will have to be posted along the border--and it is likely many of them will come from the bases in Colorado Springs.

Even absent that, with a US economy headed into recession and a federal deficit that will explode, military spending will not be the sacred cow it has been for the last couple of decades. Politics will force the military to downsize. When they do make cuts, they will look where the big money goes--personnel and bases--and I doubt the bases in Colorado Springs will be immuned. Politically, closing the only military base in a community will look much less attractive than closing a military base in community that has several. The Springs has dodged some bullets with base closings before, but I don't think their luck will last the next time.

[Charles]

Originally Posted by jazzlover

When they do make cuts, they will look where the big money goes--personnel and bases--and I doubt the bases in Colorado Springs will be immuned.

Instead of cutting out a bunch of troops, just cut back on one of these aircraft carriers


Or one of these expensive, super stealth aircraft

[Bob from down south]

I think the AF already has the carrier in the 2014 POM.

Here's the first mainstream media report I've seen on the wave of pay option ARM defaults that is lined up to follow the subprime default peak, coming to a market near you from 2009-2012.

"Real estate market still going up?" Yeah, right.

Option ARMs, next chapter in U.S. housing crisis | Reuters

[Bob from down south]

Here's a CNN video clip on Colorado foreclosures.

Free Video - Business and personal finance news from CNNMoney

It shows a slide that said there were ~2,570 foreclosures in El Paso county from Jan-Sep 2007, as many as all of 2006. I saw a count of 3,800 total for the year on another site.

So, at least with respect to the number of foreclosures, the market is indeed "going up"

[Bideshi]

Yesterday's market report said new housing starts for multi-family apartments is UP. That suggests that some investors are betting on a lot of people entering the rent market after being foreclosed. I think they are betting wrong because I see an embarrassing abundance of empty apartments/condos already.

[ryanek9freak]

well, where else would they go? There may be some truth to that. I was in that situation before, about 5 years ago when my ex wife decided she'd just dissapear overnight and leave me with a house I couldn't afford by myself. And I didn't have some crazy ARM sub prime loan, just a 30 year conventional, at 5%. I tried like hell to sell it for a year, but had no takers, so I had no choice bto file chapter 7 and bite the bullet. And where did I go? An apt. right down the street.

[Bob from down south]

One of the houses I've been watching closed this last week. ~4000 sq ft on 5 acres north of Falcon.

The brochure I have from the showing in Sep 07 says "priced to sell at $447,500"

In Jan they reduced the price to $399,500 after sitting over two years on the market.

It closed last week with a sales price of $365,000.

Good things are coming to those who wait...

[jessame10]

But then what will happen to all these empty 'foreclosures?' I know sometimes the 'owners' wreck them on the way out, but I've heard that banks may start renting them.....further saturating the market perhaps?