Case-Shiller: Denver No. 6

Source: Standard & Poor’s

Denver-area home prices rose by an average of 2.6 percent in the 12-month period ending in January, shows the closely watched S&P/Case-Shiller Home Prices Indices released on Tuesday.

The increase, the largest since the worst housing market since the Great Depression began, provides strong evidence that the Denver-area housing market is past its bottom and is recovering.

That ranked Denver No. 6 for year-over-year appreciation, according to the index of 20 major metropolitan statistical area. (See chart at the end of the article for a comparison to other cities.)

More importantly, Denver’s appreciation was the biggest one-year percentage gain since the fall of 2006, according to an analysis of Case-Shiller data going back to 1987 by InsideRealEstateNews.com. The last time the Denver-area experienced a bigger one-year percentage gain was the 6.75 percent in October 2006 from October 2005

It was also the best  January to January period since the market gained 5.62 percent from January 1995 to 1996.

The latest report also shows the third  consecutive year-over-year gain for the Denver area. In December, Denver-area housing prices rose slightly more than 1.1 percent from December 2008, while it rose about a half percent from the one-year period ending last November. November ended 2.5 years of year-over-year housing prices dropping in the Denver area. Until November, prices had fallen every month-to-same month from the previous year,  since a slight increase in May 2007 from May 2006, shows the InsideRealEstateNews.com analysis.

“I think this is definitely a very good sign,” said economist Patty Silverstein, principal of Economic Development Research Partners. “When we start to see several months of a positive trend, we start to think, “OK, maybe we really are moving forward and we are finally starting to recover. . .I think we can safely say now that we have bottomed out. We are past the bottom and we are on an upward swing.”

The  Case-Shiller report reaffirms what a lot of Denver brokers are seeing.

“That is all perfectly consistent with the Denver-area market. It is tracking what happened in the housing economy and the overall economy,” said Bauer, who releases a monthly report on the Denver-area housing market based on Metrolist numbers.

Metrolist tracks all of the homes sold by Realtors, while Case-Shiller “pairs” same home sales in an attempt to remove the statistical bias of home sold each month in a wide-variety of homes. For example, a large number of low-priced foreclosures being sold can drive down the average and median prices, while a few huge sales may drive the overall prices up.

Losing streak ends

The latest Case-Shiller report marks the first time since 2004, that the Denver market had been in positive territory for a 12-month period ending in January. From January 2003 to January 2004, the market gained 1.9 percent. the best January to January period was form 1999 to 2000, when prices rose 13.7 percent overall. The market also showed a double-digit return from January 1993 to January 1994, gaining 11.29 percent.

“When I started in the business in Denver in 1994, it was like we could do no wrong,” because the market was so strong, Bauer said.

Bauer said the most recent Case-Shiller report is very positive.

“We had that big let down at the end of last year,” following the renewal and expansion of the federal tax-buying credits in early November. Earlier in the fall, buyers had been busy buying homes for fear that the tax credits would disappear, and when they were renewed, a sense of urgency left. Now, qualified first-time home buyers and some move-up buyers have to place homes under contract by April 30, and close in two months after that, to take advantage of the tax credits. Qualified first-time buyer can receive a tax credit of up to $8,000, while qualified current homeowners can receive a credit up to $6,500.

Improvements across board

Bauer said what is encouraging about the Denver market is that “it isn’t just first-time home buyers” purchasing homes, and prices appear to be past the bottom at just about every price level, except perhaps for the most expensive homes in the market. “We are seeing price increases in a lot of price levels, and we have adequate inventory, which brings us into a feasting activity,” Bauer said. “It’s not quite a frenzy, but we are seeing multiple offers at the lower-end.”

Jeff Bernard, principal of Bernard Real Estate Analytics, said the “big question is what happens after the stimulus plans are over.By definition, the purpose of a stimulus is to stimulate the market, and that is what it is doing. The key thing I am going to be watching is what happens in July, when the stimulus money has worked its way through the market, assuming that there is nothing else offered. It will be interesting to see what happens in the market when private enterprise returns, when no public stimulus will be affecting the housing market.”

Ending tax credits a concern

Economist Silverstein also is concerned what happens when the tax credits end.

“That really is the big question,” Silverstein said. “”You hope that consumers will start to feel strong enough to move forward without the tax credits, but is that the reality?  I don’t think we can say that yet. When they do expire, we will see some softening in the home sales market again. Even though the recession may technically be over, it is over, but still there are a lot of people who are challenged in their job situation. Until more people, in general, are comfortable with their job situation, both in Denver and across the country, people won’t feel like it is a good time to buy a home.”

Silverstein also is concerned about the number of home foreclosures in the Denver area.

“There are still some things to be leery of  in out marketplace,” Silverstein said. “We still have very high levels of foreclosures. While the big increases in foreclosure activity have decreased, we are still stuck with some very high levels of foreclosures, not just here, but across the country. It is going to take a little bit of time to work through that issue. But I do think overall, we are moving in the right direction.”

National news mixed

From December to January, the news is not as good for Denver or for the nation. Denver prices fell by 1.3 percent in December to January, compared with a 0.4 percent drop for all 20 cities in the index.

“The report is mixed,” said  David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “While we continue to see improvements in the year-over-year data for all 20 cities, the rebound in housing prices seen last fall is fading. Fewer cities experienced month-to-month gains in January than in December 2009, on both a seasonally adjusted and unadjusted basis. “Moreover, in four cities – Charlotte, N.C., Las Vegas, Seattle and Tampa – prices reached new lows following the financial crisis. Tampa and Las Vegas experienced some of the largest gains and declines in this cycle, while Charlotte and Seattle saw much more modest price booms and relatively late peaks. On a brighter note, San Francisco and Minneapolis are 15.2% and 12.9% above their trough values.”

Blitzer added that other “data on housing also paint a mixed picture. Housing starts continue at extremely low levels, recent reports of home sales suggest the market remains difficult, and concerns remain about further foreclosures and a large shadow inventory of unsold homes. We are in a seasonally weak part of the year, but given the S&P/Case-Shiller Home Price data reported today, we can’t say we’re out of the woods yet.”

Share this:

Related Posts:

• Case-Shiller: Denver No. 6
• Denver housing data focus of economic report
• Denver economic forecast released today
• Denver housing score well for price changes, foreclosures
• Denver homes appreciate 30% from 2000