Home prices up only 7.1% over a decade? Vote at the bottom of this blog.
Lane Hornung doesn’t want to provoke a “data battle” with Steve Laposa regarding how much home values rose in the Denver-area from 1999 to 2009.
Indeed, Hornung, president of 8Z Real Estate and Cohomfinder.com, would love to collaborate and share data with with Laposa, the director of the Everitt Real Estate Center at Colorado State University.
“We both have the same goal – help the consumer make sense of the real estate market, so they can make informed decisions,” said Hornung, whose companies are sponsors of InsideRealEstateNews.
Study a head-scratcher
Hornung was one of several Denver-area real estate experts confounded and confused by the Everitt center’s exhaustive study that found overall, homes sold in the six-county Denver area had only appreciated 7.1 percent from 1999 to 2009, The research did find that home prices rose by 35 percent from 1999 to 2005. But the the research, in collaboration with the Colorado Association of Realtors, showed that if you paid $100 for a home in 1999 in the Denver-area MSA, in 2009 it would only be worth $107.10.
When InsideRealEstateNewsfirst told Hornung of the study, he quickly called up data on his computer during the to review findings of two other groups, S&P/Case-Shiller and the Federal Housing Finance Agency. Hornung found that the Case-Shiller index pegged the appreciation at almost 45 percent, while the FHFA put it about 52 percent. Hornung stands behind his analysis of the data.
Laposa, in his response to criticisms to the report, singled out Hornung’s interpretation of the data, saying it actually shows almost a 28 percent increase and almost a 38 percent increase, from Case-Shiller and FHFA, respectively, from December 1999 through December 2009.
Laposa also challenged critics to “produce empirical data to support their alleged housing price appreciation rates.”
Hornung is accepting that challenge.
“I am a strong believer in making real estate decisions and conclusions based on solid data rather than “gut feelings. Anyone who has spent time on our website, http://www.cohomefinder.com/, and used the powerful, real-time market statistics we deliver to the home buyer and seller will attest to that,” said Hornung, who knows his way around a calculator, as he graduated, with honors, with an Industrial Engineering degree from Stanford University and a MBA in Finance from the University of Colorado. He has also taken extensive coursework in statistics and mathematical modeling at both the undergraduate and graduate levels.
He says he knows that some observers don’t think that Realtors are all that good at math. “Or what we agents call “cypherin,” he joked.
Hornung used Case-Shiller and FHFA data from January 1999 to December 2009, a slightly different time frame than the EREC-CAR House Price Indices. He used seasonally adjusted data from Case Shiller and first quarter 1999 through fourth quarter 2009, also seasonally adjusted, for his FHFA calculations.
Using different time frames can provide “significant differences,” Hornung said, but not to the vast degree between the Everitt Center report and the findings of others, which have used the same methodology for years to determine trends in home prices.
Wide gaps raise eyebrows
“The broader and more relevant discussion is whether appreciation of 7.1% as cited by the Everitt Real Estate Center is consistent with the Case Shiller data showing 44.4% appreciation (Jan 1999 to Dec 2009) or 27.9% (Dec 1999 to Dec 2009), or the FHFA data showing 51.8% (first quarter 1999 to fourth quarter 2009) or 37.9% (fourth quarter 1999 to fourth quarter 2009),” Hornung says. “Those are quite large differences, and my belief is that most home owners in the Denver metro in 1999 would find the Case Shiller data and the FHFA data more accurately reflect their own home ownership experiences.”
Indeed, Hornung, as well as InsideRealEstateNews, welcome a chance to hear from consumers who bought a home in 1999 and what their experiences have been as far as the price change.
Homeownership, a good long-term investment
“After all, statistics are simply an attempt to mathematically model real-world experiences and are inherently not 100 percent accurate, as indicated by the concepts such as confidence intervals,” Hornung said. “My hat goes off to folks like Mr. Laposa and his associates at the Everitt Real Estate Center, who attempt to tackle the challenging task of making sense of an extremely complex housing market.”
And real-experiences may prove more powerful than any study.
“Statistical modeling aside, no one can argue with the validity of a homeowner who purchased a ranch in Arvada in June of 1999 for $122,500, maintained the home but made no major additions or improvements, and sold the same home in December of 2009 for $183,750.”
Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865.