ROUND TABLE: Not all is dark with housing

There's not much good news on the housing front.

Home sales, prices and new construction are down; foreclosures are way up; and the Pikes Peak region is wrestling with the same problems found in many areas of the country.

Seated around a breakfast table at a home for sale in Colorado Springs' historic Old North End, four members of the local housing industry recently discussed issues of the day, and saw some rays of light amid the doom and gloom:

Question: How would you characterize today's market?
Becky Gloriod, co-owner of Gloriod & Associates: I think it's picking up, I really do . . . If things are priced right, they sell. And there's a lot of inventory. Sellers are making a mistake in thinking the market is going to get better and the prices are going to go up. I don't think the prices are going to go up; I think the market is going to get better, but because of all of the inventory, especially in the high-end homes, there are so many of them, that it's just too much competition and the prices are going to be pretty flat for a few years. I mean two or three years.

Jay Walther, president of the Colorado Springs division of Oakwood Homes: We've reached equilibrium with inventories and supply. We hit bottom last fall . . . I agree that all prices will remain flat . . . Prices have come down with the shift in demand. Our median price now for El Paso County is $197,000, $198,000, which appears to match historical averages.

Bill Hurt, owner of ERA Shields Real Estate: What we have been seeing really for some period of time is the homes that are taken to the market correctly in terms of pricing, condition, staging - everything that can be done - sell quickly. They'll sell in the first 30 days. If they don't take that approach, we see it then jump out to 120 days, and plus.

Jim Stiltner, co-owner of MasterBilt Homes, based on Monument: Sellers right now are willing to pay your closing costs. I mean everybody, or not everybody, but a lot of people are more aggressive with what they're doing. So, if you get 5.75 percent (as a mortgage rate), you're not just getting that, you're getting closing costs sometimes.

Q: What are the good things about the market today?
Hurt: Lots of inventory to choose from, so there are good properties. However, there are certain areas where it is very difficult to find a good value, a well-priced listing that's in good condition . . . Interest rates at 6 percent are still phenomenally attractive.

Gloriod: Everybody has in their mind that they can really get a good deal if they can find a foreclosure. I showed a couple foreclosures . . . The light fixtures are gone, the towel racks are gone, the window coverings are gone, the yard is dead . . . The carpet needs replacing . . . All of a sudden, that foreclosure price doesn't look that great.

Walther: The homes that we're building, at least for the new residential, new-home sales, they're far superior than homes we were building five, 10, 20 years ago. More energy efficient. The construction practices we're using have come a long way. That, especially with rising energy prices, makes a big difference.

Q: What are some of the not-so-good things right now?
Gloriod: The appraisers are running scared. They're erring on the safe side, and it's hurting the market . . . They're not even being fair. I mean, they're being . . . too conservative.

Walther: Don't you think it's part of the natural process though? Where appraisers and credit lenders were a little too liberal over the last few years?

Gloriod: Yes, they were.

Walther: And so today, then, we're overreacting, overcompensating. What it will serve to do over the medium or long term is make the market healthier. It will come back; the pendulum will come back.

Hurt: The ARMs, the adjustable-rate mortgages, are great for the right reasons. When people use those for the wrong reasons, that's the people that are today in trouble. When they used it just to buy more house than they could really afford, with the anticipation that it was going to increase in value . . . those are the ones in trouble . . . Unfortunately on the foreclosure side, the brunt of this is in the ($100,000s), upper ($100,000s to mid-$200,000s). (That's) where the heaviest part of that foreclosure activity is.

Gloriod: And that affects the whole market. Because when the first-time home buyer can't buy, then the people who have their houses (for sale) can't move up and it has really hurt the market.

Stiltner: I'm the move-up king in Monument and it has affected us. Because the guy that's moving from Briargate to Gleneagle, and the guy that's buying from Gleneagle to my property can't do it because the guy in Briargate can't sell his house right now.

Hurt: In spite of the level of foreclosures, the pricing has held very well . . . We had, and still have, real value in real estate.

Q: A Gazette analysis shows that El Paso County had a 0.5 percent increase in prices in 2007 over 2006, smaller than single-digit gains we've seen the past several years.
Gloriod: At least it's a half-percent. It's a decent showing.

Stiltner: What a great statement; we did not lose huge values.

Hurt: We've got a lot of listings, but the listing inventory is actually, I think in January it was about 7 percent up from last year, but . . . it's been running substantially higher than that month over month. So that's an improvement . . . There's a sense that there is more activity out there.

Q: Why have our prices remained relatively stable?
Hurt: Real value.

Walther: We didn't have that irrational run-up that we saw mostly on the coasts and places like Las Vegas. But it starts with the value of land. And our land value has not changed; and it has not escalated like it did in places like Las Vegas and California.

Gloriod: We didn't have that run-up because we didn't have people coming in and buying these second homes. . . . People in these Sunbelt areas, in Phoenix and Las Vegas, they were growing so fast, that the people that were already there were watching the demand for housing go up, up, up . . . So, they got in the market as individual investors. And they were buying these houses, pre-construction, with the idea that they would close in nine months, but that they'd have it sold before they had to close on it. So, we didn't have that happen either.

Walther: That's a great point on the investors . . . On the coasts and where the national builders are, they don't mind selling to investor groups, and they'll sell a whole block to a group of investors and you end up competing against each other and that's what leads to that price inflation. I think the local builders and those of us here in El Paso County have restricted that investor purchase and sale over the last several years.

Stiltner: That goes back to the appraisers, though. The investors were buying those new homes based on appreciated value, and they were buying them at 80 percent of appraised value, which was really not the market value.

Gloriod: I know several people that are wanting to move here from Vegas, and they have houses to sell and many of them have investments that they thought were investments. They got caught up in buying that new house in the new development and they're not selling either.

Hurt: It's kind of an interesting analogy with Phoenix . . . The population of Colorado Springs is give or take 600,000. Phoenix is about 6 million, a 10-to-1 ratio. When you look at the number of (sales) transactions, last month there were 650 here; it was 2,300 in Phoenix, 3½-to-1 . . . Our demand is not that far out of whack.

Q: Have your jobs changed because of the housing slowdown?
Stiltner: Our incentives have changed, big time . . . Up in Monument, for example, you buy a home from MasterBilt Homes, we're doing closing costs, I've got a quad (all-terrain vehicle) with a snow plow built into the purchase price of the house . . . You have an ability to negotiate with the builder at a different level right now. I don't know resale very much, but on new homes, they (buyers) walk in the door and say, "I read in the newspaper so-and-so builder is doing a $50,000 discount." We're a small builder, we don't do that. But you didn't get a $6,700 quad last year. You didn't get $1,000 worth of closing costs. You didn't get a closet upgrade in the master bedroom. You didn't get granite countertops at half price . . . You are now.

Walther: At the end of the day we haven't changed; we're not an incentives builder . . . There's a few national builders that are left here in town, and those are the ones doing the large discounts.

Gloriod: I'm working harder, I'm doing more open houses . . . When the market was better, I had enough business, or so much business, that I did not have time to hold houses open. We're sitting the lots in Black Forest, we're out there in blizzards . . . I work so hard on my market analysis and I bring in so much information, I spend hours on those; I don't just plug some stuff into a computer and show up at the door.

Hurt: Everybody that is doing well, or achieving the success they are looking for in this market, it's because they're working harder and working smarter. They're not just working longer.

Q: If we are entering a recession, or if we are already in one, how will it affect the market?
Hurt: As national organizations cut back and don't make their profits, the ripple effect certainly impacts everybody, regardless of where you are. But I do think we are somewhat sheltered from that potential storm in terms of the economic opportunities going on in Colorado Springs; when you look at the economic indicators here, they're still positive. We haven't experienced job losses. Average incomes and all those things have not been a negative . . . Over the years, people have been critical that Colorado Springs had too many of their eggs in the military and defense basket. Well that's a pretty good basket to have your eggs in right now.

Walther: Not only is the housing market regional and local, so is the economy regional and local. Being privately held and local to Colorado, obviously if Colorado does well or El Paso County does well, we do well. The troops are a great bonus when they come. But we've had great growth in Fountain without the wave.

Gloriod: All the talk about we're in a recession; I think we've already been hit by that. They have been talking about the real estate bubble on Moneytalk and all these TV shows for over a year. And they've been talking about it's coming, it's here, you know, so and then, they've been talking the R-word for months, and so, I think we've already taken the hit.

Stiltner: Don't houses still sell in recessions?

Walther: They do.

Q: Will foreclosures hurt prices in our market?
Hurt: I think it's going to be very neighborhood-specific.

Gloriod: Very neighborhood-specific.

Walther: It's very similar to repossessed cars. Or flood cars that are out there. They're out there; they're out there all the time; they've always been out there, there's markets for them, there's auctions for them; but it doesn't impact the overall value of the car.

Stiltner: There are investors . . . out buying foreclosures right now. Good. Go ahead. Take 'em off the market.

Questions and answers were edited for space and clarity.