John Rebchook is a former Rocky Mountain News reporter with more than 30 years of experience in writing and communications... Denver performed the best of the 20 major metropolitan housing market tracked in the closely watched S&P/Case-Shiller Home Price Indices report released today.
Denver’s housing market showed only a only a 0.1 percent dip in housing prices in the year ending in October, compared with an overall drop of 7.3 percent for the 20 areas in the report. The 10-city index in the report fell overall by -6.4 percent.
Tom Clark, executive vice president of the Metro Denver Economic Development Corp., said that Denver’s No. 1 ranking is the latest sign that Denver’s economy is out-performing the nation’s.
“Job growth does matter,” Clark said. “What a concept.”
Gary Bauer, an independent residential broker in Denver couldn’t agree more.
“Once again, this shows the strength of the Denver market,” Bauer said. “We continue to lead the nation as far as recovering from the recession – the recession is not over yet – but we will be one of the first to emerge.”
Bauer said that “two-thirds” of the Denver-area housing market “still moving,” if not showing spectacular performance. Only the high-end market continues to be soft.
“The market has moved from the only activity being in the first-time buyer to what I call the “move” buyer,” Bauer said.
Bauer has said that the move buyer will benefit from the expansion of the federal tax-credit for qualified people who own their owns. Some of those buyers who qualify for the $6,500 tax credit will downsize to smaller, less expensive units, while others will move-up, according to Bauer and other Realtors.
Bauer said that while it some ways he is a “little surprised,” that Denver out-performed the other 19 cities in the Case-Shiller index, in “another way I am not…We have seen two or three months of very consistent activity.
Tom Cryer said if a homeowner wants to sell a house quickly in Denver, he or she needs to price it slightly below the market.
“If you think the market is $100,000, and you price it at $97,000, it will go away,” said Cryer, a broker with the Kentwood Co.
Cryer also said he thinks that move-up buyers may decide that it is an excellent time to snap up homes priced up to $500,000, with sellers willing to deal, near-record low mortgage rates, and the $6,500 tax credit for qualified existing home owners, starting in 2010
“I feel we are going to start see a wake-up call in the $250,000 to $500,000 price range,” Cryer said. “But we will know better after the first quarter of 2010.”
The market for homes that require more than a conforming loan of $417,000, however, remain soft, he said.
“In the last 60 days, we have seen houses that previously had sold for $5.9 million selling for $4.1 million,” Cryer said. “I think the luxury housing market remains in a state of malaise.”
He also said people who bought McMansions during better economic times that they thought would never end, are facing buyer’s remorse as large as their 10-bedroom estates.
“There has been a mind-set change,” Cryer said. “Let’s take a hypothetical guy in Cherry Hills who bought a 10,000-square-foot home with Monopoly money. Now, he says, “Gosh, with taxes and water bills, (which can hit $4,000 during a hot month), and my kids are grown and are only here a couple weeks a year, why do I need this? I don’t mean to be trite, but it’s like the Prius effect. If my Prius seats four comfortably, why do I need a Cadillac?”
Overall, “the report should be described as flat since the turn-around in home prices seen in the spring and summer of this year has faded with only seven of the 20 cities now seeing month-to-month gains,” said David Blitzer, managing director and chairman of the Index Committee at Standard & Poor’s.
From September to October, Denver prices were down 0.4%, while the overall market for the 20 cities showed no change from the same period in 2008.
“Coming after a series of solid gains, these data are likely to spark worries that home prices are about to take a second dip,” Blitzer continued. “Before jumping to conclusions, recognize that the one time that happened at the beginning of the 1980s, Fed policy saw dramatic reversals, which is very different from the stable and consistent Fed policy we have today. Further, sales of existing homes – those included in the S&P/Case-Shiller Home Price Indices – have been very strong in recent months, working off the inventories of houses for sale. At the same time, housing starts remain weak, fears that the market will be swamped by a wave of foreclosures are heard and government programs aimed at the housing market will expire in the first half of 2010.”
The peak-to-date figures for the 10-City and 20-City Composites through October 2009 now stands at -29.8% and -29.0%, respectively.
Long-term, however, the Denver housing market remains in the middle-of-the-pack. Denver showed a 28.91 percent increase in prices since January 2000, slightly better than the inflation rate. By contrast, the 20 cities in the index showed an overall gain of 46.58 percent.
However, some Southwest cities that are frequently compared to Denver, have seen their long-term, as well as short-term prices fall to earth, after prices surged into the stratosphere a few years ago.
Since 2000, prices in Las Vegas and Phoenix, respectively, have risen only 4.7 percent and 10.71 percent.
“That is kind of good news and bad news,” said Clark, of the Metro Denver Economic Development Corp. “That good news is that it shows fundamentally, housing values are built on job growth,” and not on ‘build it and they will come philosophy in Phoenix or hope that home buyers will continual to flock to Vegas, no matter the state of the economy.
“The downside is that prices had risen so much in Phoenix during the boom, that their prices were equal to us, so it was not so much sticker shock when someone from the Midwest looked at Denver housing and Phoenix housing,” Clark said.
“Now, Phoenix is losing that disadvantage, as their housing stock declines in value,” Clark said, and comparable home prices trail those in Denver, as has been the historical pattern. That means that Denver will not be able to tout inexpensive housing as an economic incentive, when compared to Phoenix, he said.
“But I don’t think this will be a huge problem, because home prices have declined across the nation,” Clark said. “I do not think it will be quite the obstacle for companies to overcome as far as attracting and retaining people as it would have been in the past.”
Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865.
Area Appreciation since 2000 September to October change 1-year change from October
U.S. 46.58 0.4% -7.3%
Atlanta 10.12% -1.0% -8.1%
Boston 54.7% -0.6% -2.8%
Charlotte 19.05% -0.7% -7.0%
Chicago 30.78% -1.0% -10.1%
Cleveland 4.97% -1.6% -3.5%
Dallas 19.90% -0.6% -0.6%
DENVER 28.91% -0.4% -0.1%
Detroit -26.93% 0.2% -15.1%
Las Vegas 04.7% -0.1% -15.1%
Los Angeles 68.43% 0.3% -6.3%
Miami 49.09% 0.4% -14.0%
Minneapolis 24.51% -0.5% -8.4%
New York 75.01% -0.0% -7.7%
Phoenix 9.26% 0.8% -21.8%
Portland 49.72% -0.5% -11.8%
San Diego 55.37% 0.4% -2.4%
San Francisco 35.81% 1.3% -2.6%
Seattle 49.26% -0.4% -12.4%
Tampa 40.27% -1.6% -15.2%
Washington, D.C. 79.71 -0.4% -2.8%
Composite-10 58.82% 0.0% -6.4%
Composite-20 46.58% 0.0% -7.3%
John,
I think the column of "Appreciation Since 2000" is very misleading.
US average CPI inflation during the same period was 26%.
Therefore, real prices in Denver are essentially flat over the last decade.
Your house is NOT an investment. It is a place to live.
You're wrong, Dave. Not only is your house a place to live, it has definitely been an investment for many years. And what about the mortgage interest tax deduction? Maybe in todays marketplace, appreciation is not the factor it has been in the past. However, real estate has been a proven winner for many investors. A good friend's parents (both)passed away in recent years. When they were young, the bought a peice a reale state in Florida for $5,000.00. After they passed away, and the estate was settled, the property sold in excess of $500,000.00.
@Rick,
You need to learn the difference between nominal dollars ("real estate in Florida for $5,000. After they passed away… the property sold in excess of $500,000") and real dollars.
And, I was not referring to Florida real estate, I was specifically referring to Case-Shiller data for Denver and the US Urban CPI.
In general, housing sucks as an INVESTMENT.
See http://bubblemeter.blogspot.com/2009/05/cities-be...
See http://3.bp.blogspot.com/_GLyD4Zq2bTE/Somhxq5pqGI...
See http://mysite.verizon.net/vzeqrguz/housingbubble/
See http://www.calculatedriskblog.com/2009/05/house-p...
From a real estate practitioner's perspective, the recent Case-Shiller reflects what we're seeing "on the ground." The market has been steady, buyers and sellers are making deals and prices remain relatively flat. It's true what Dave said above, that a home is not an investment vehicle, but that doesn't mean buyers should remain on the fence. This will prove to be a historically great time to buy a house. Sellers need to be very realistic about the price they put on their houses, though.
As an Exclusive Buyer's Agent (EBA) I've seen the Denver real estate market improve since last summer. But then the inventory was greater. Inventory has shrunk since then and prices are beginning to rise. I've advised my clients to be prepared for higher interest rates heading into the spring market plus higher prices. Finding a hot deal is going to be tougher for buyers than it has been in several years. Even REO's are getting multiple offers and higher than asking price.
Ahhh, but let's see what happens after the tax incentives of $8000 for first-time buyers and $6500 for current owners goes away come April 29th! Having practiced real estate leasing and sales since 1976, I've seen plenty of roller coaster rides. One has to live somewhere: why not buy? Pay potentially less than rent. Receive a tax credit and interest deduction. Take a slight chance that your property won't appreciate in value over time. Foreclosures are still plentiful; its the loan that's tough to obtain!
Barb is correct. Home loans are difficult to obtain right now, and no doubt will become a speculative and sparse commodity over the next several years.
Consider this: The US Treasury announced last week that Freddie Mac and Fannie Mae will get its full support until 2012. So who benefited first from this announcement? The companies that issued the mortgaged backed securities that started this economic chaos. These companies are buying back mortgages—many that will default—and it is mortgages that were originated by these banks. But now the speculation is gone because they’re guaranteed. So who really benefits from this simulative decision? You guessed it: the banking industry benefits once again.
Here are some fascinating stats: Fannie and Freddie guarantee approximately $5.5 trillion of an estimated $11.8 trillion outstanding residential mortgage loans. The Federal Reserve has purchased over $1 trillion Freddie and Fannie bonds, and the Treasury has purchased ~$190 billion Freddie and Fannie bonds. Add on over $110 billion in Freddie and Fannie preferred stock purchases by the Treasury, coupled with purchases of nearly $125 billion in Freddie and Fannie bonds by the Fed—well one has to wonder how long this will last. Oh, I nearly forgot, the two entities lost ~$180 billion over the past two years.
The point is: how long can this go on? These entities have supported the home mortgage process for over 40 years; and now both Freddie and Fannie have a dubious future. If they fall what become of the housing industry? We will entirely dependent on Banks to make home loans that the banks will be required to keep and not sell to a secondary market. YIKES! Maybe the banks can tranche the loans into more unsavory bonds and sell them as leveraged securitized debt again!
[...] Rebchook of InsideRealEstateNews.com has a great write-up on his blog, posted a few hours ago, detailing Denver’s latest top spot – Denver is on a lot of Top 10, [...]
[...] Rebchook of InsideRealEstateNews.com has a great write-up on his blog, posted a few hours ago, detailing Denver’s latest top spot – Denver is on a lot of Top 10, Top [...]
[...] What better way to finish off 2009 than with some great news about Denver’s Housing Market performance. The S&P/Case-Shiller Home Price Indices measures the residential housing market, tracking changes in the value of the residential real estate market in 20 metropolitan regions across the United States. John Rebchook does an excellent summary of the report details and here are the opening few lines from his blog post.. [...]
This being my 7th recession gives me an excellent perspective to say that housing prices will not be going down; particularly since new construction is down from 87+% to 100% based on price range. Costs of construction will continue to rise, particularly since the majority of the components of construction are commodities, and subject to world demand, and 5 developing countries are experiencing double diget growth and want these commodities. Labor costs aren't going down, and the myriad government bureaucracies with their finger in the housing pie will be looking at new and dramatic increases in the parasite costs they impose on housing. So don't think housing is gonna get any cheaper.
[...] By contrast, ”Markets such as Boston, Charlotte, Cleveland, Dallas and Denver never saw the large double-digit price increases in the 2004-2006 period, but their relative rates of decline have also remained comparatively benign,” according to the analysis by S&P/Case-Shiller. “As of the October 2009 report, Denver’s rate of decline is close to flat, at -0.1%,and Dallas is not far behind, down only 0.6% on an annual basis.” The October report was the most recent one. (Denver was rated No. 1 in the October report. To read more about it, please go to this blog.) [...]
[...] October, Denver was ranked No. 1 by Case-Shiller, with a 0.1 percent loss. (Please visit this link for a blog on October’s [...]
[...] October, Denver was ranked No. 1 by Case-Shiller, with a 0.1 percent loss. (Please visit this link for a blog on October’s [...]
[...] October, Denver was ranked No. 1 by Case-Shiller, with a 0.1 percent loss. (Please visit this link for a blog on October’s [...]