Home prices in the Denver area rose an average of 4.1 percent in March, marking the fifth consecutive month of year-over-year rising home prices, according to the closely watched S&P/Case-Shiller home price index.
Year-over-year home prices in the Denver area have risen each month since November 2009, according to the index, which was released on Tuesday and tracks 20 major markets across the nation. And each month the percentage increase has risen. In November, the 12-month change was 0.5 percent; 1.2 percent in December; 2.6 percent in January; and 3.6 percent in February. The index of single-family home prices uses “matched price pairs” of thousands of homes.
Last year, Denver was often one of the top three cities tracked by Case-Shiller, as far as year-over-year changes. On occasion, it even was one of the top metro areas, even though homes had slipped into negative territory – other markets were hammered far worse.
Denver No. 7
Denver’s performance in March, however, was only good enough for seventh place, as other markets, particularly in California, just shot the lights out. San Francisco, for example, was up 16.2 percent from March 2009. San Diego was up 10.8 percent, marking its 11th consecutive month of increasing home prices.
“California is such a yo-yo,” said Chris Mygatt, president of Coldwell Banker Residential Realty Colorado. ”Honestly, it is unusual for us to be No. 1, No. 2 or No. 3. Denver is known as a relatively stable marketplace. We don’t have the yo-yo pattern of collapsing and taking off again. Our numbers are being driven by unemployment, which is still a couple of points below the national average. There is something to be said for a steady, relatively affordable market.”
Denver a better bet than Vegas
Long-term data from Case-Shiller supports Mygatt’s thesis. Both the Denver and Las Vegas markets peaked in price around August 2006. At that time, Denver’s prices had risen about 41 percent from January 2000, while Las Vegas prices were up just under 135 percent during the same time period, according to Case-Shiller. Since January 2000 until March 2010, Denver prices are up an overall 25 percent, while Las Vegas prices are up a mere 2.6 percent.
“That really tells the whole story,” Mygatt said. “Basically, Denver home prices have kept up with inflation. And that’s not bad, for a home that you can enjoy living in. And when you think about it, if you bought a house 10 years ago for $100,000, you probably put no more than $15,000 down. Your house is probably worth $125,000 today, but your cash-on-cash return is much greater than that $25,000 in appreciation And that’s not a bad investment, especially when you consider that you enjoyed the tax breaks of owning a home. And investing in a home may seem especially attractive now, considering how volatile the stock market is these days,
Part of the reason that the $1 million-priced home sales activity has been rising in the first four months of 2010 in the Denver area is because people have been taking some money out of stocks and putting them into homes. “They see they can get a really good deal in upper-end homes, and want to take advantage of that,” Mygatt said. “I think people will increasingly be looking at the huge ups and downs in the stock market, and invest it in upper-end homes. I’m going to be watching that $1 million and up market very closely in May. I think it will be crucial to see that market to continue to improve.”
No place to go but up
Tom Cryer, a broker with the Kentwood Co., said he is not surprised that Denver in March saw appreciation from a year earlier.
“Once again, we are working off a baseline in 2009 that was just awful,” Cryer said. “If you can’t beat 2009, we just aren’t doing our job. When the bar is as low as it was in 2009, we have to be better this year.”
Also, the $8,000 tax-credit for first-time buyers, which required that a contract be placed on a home by April 30, was still in effect in March, he noted. “I would say, let’s wait and see what happens when the tax credits are no longer a force,” he said. Mygatt, however, noted that mortgage rates near the lowest point in a half century, will pick up some of the slack of people who didn’t cash in on the tax credits. Zillow.com reported today that the average price of a 30-year, fixed-rate loan was 4.6 percent. A major reason rates are so low is because of problems with the economy in Europe, as investors seek a safe haven in U.S. bonds.
Super-low rates offset tax-credit loss
“It was not that long ago when everyone was saying that rates were going to rise 100 basis points, 1 percent, because the Fed had ended its $1 trillion purchases of mortgage-backed securities,” Mygatt said. “But for a lot of people who missed the tax credits, the lower rates will provide an even bigger benefit. They couldn’t be coming at a better time.”
Cryer wasn’t surprised to hear that major cities in California are seeing double-digit increases. Colleagues in northern California have been recently telling him what a robust market they are seeing.
“I was talking to a relocation broker who is helping 100 people move from Chevron in California, and she said they are selling their homes in a week,” Cryer said. “They are selling for lower prices than they used to sell for in 2007, but they are receiving multiple offers, if the homes are not too far of a commute. Also, the technology business and hiring is picking up in California. Last year, was the year when a lot companies decided they have to start getting upgrading their technology again.”
Recovery is real
Economist Patty Silverstein said that today’s Case-Shiller report shows that “here in Denver, the housing recovery is well under way. There is something to be said about our stability, compared with the ups and downs of other cities over the last several years.”Silverstein, principal of Development Research Partners in Littleton, agreed with others that the ‘big question mark” is how the housing market will perform now that the tax credits are gone. And while the ultra-low mortgage rates can reduce the cost of people buying homes, as well as putting money back into people’s pockets who are refinancing, she said they are also a grim reminder of what is often global, financial turmoil.
“That’s a little frightening,” Silverstein said. “As much as we like to celebrate the steps that we are taking into the recovery – and most of our indicators are either in positive territory or are moving toward positive territory – we must be aware that there are some dark clouds looming behind us.”
Housing still mixed, nationally
Nationally, “The housing market may be in better shape than this time last year; but, when you look at recent trends there are signs of some renewed weakening in home prices,” said David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “In the past several months we have seen some relatively weak reports across many of the markets we cover. Thirteen MSAs and the two Composites saw their prices drop in March over February. Boston was flat. The National Composite fell by 3.2% compared to the previous quarter and the two Composites are down for the sixth consecutive month.
“While year-over-year results for the National Composite, 18 of the 20 MSAs and the two Composites improved, the most recent monthly data are not as encouraging. It is especially disappointing that the improvement we saw in sales and starts in March did not find its way to home prices. Now that the tax incentive ended on April 30th, we don’t expect to see a boost in relative demand.”
From February to March, Denver home prices rose by 0.6 percent, compared with a 0.5 percent drop for the 20 metropolitan areas in the index. Only Cleveland, San Diego and Seattle performed better than Denver from February to March.
Metropolitan Area Change from January 2000 Change from March to April 1-Year Change
Atlanta 2.85% 1.0% -4.6%
Boston 50.98% 2.7% -3.2%
Charlotte 10.44% 0.8% -5.1%
Chicago 12.01% 1.7% -8.1%
Cleveland -1.12% 1.3% -6.6%
Dallas 14.31% 0.9% -4.7%
DENVER 24.0% 1.4% -3.3%
Detroit -37.99% -2.8% -9.3%
Las Vegas -4.4% 0.5% -3.2%
Los Angeles 69.07% 0.5% -3.2%
Miami 38.6% 1.2% -5.3%
Minneapolis 8.34% 2.6% -11.7%
New York 64.96% 0.7% -3.2%
Phoenix 0.4% 0.0% -9.5%
Portland 34.5% 1.2% -9.1%
San Diego 54.78% 0.2% -5.1%
San Francisco 34.42% 1.8% -5.4%
Seattle 36.56% 1.1% -7.0%
Tampa 25.10% -0.6% -9.5%
Washington, D.C. 84.9% 2.4% 1.3%
Composite-10 53.64% 1.1% -3.6%
Composite-20 39.87% 1.0% -4.5%