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Case-Shiller: Home prices up 1.8%

Home prices in the Denver-area rose by 1.8 percent in the year ending in June, according to the closely watched S&P Case-Shiller report released today. Denver ranked No. 9 of the 20 metropolitan statistical areas tracked in the S&P/Case-Shiller Home Price Indices. Overall, the 20 MSAs rose by 4.2 percent.

“I think being in the middle of the pack, or in the top 10, is very positive for our MSA,” said independent broker Gary Bauer, who released a monthly analysis of the Denver-area housing market based on Metrolist data.

“One of the things we do know it with with the July numbers (for Case-Shiller) we are going to see a dramatic adjustment,” Bauer added. “In June, we continued to have the transition from the frenzy of closings from the home buying tax credits, and prices had continued to stabilize, if not slightly increase.”

Market rebounds

In June 2009, the Denver area housing market showed a 3.6 percent drop from June 2008, according to Case-Shiller. Despite the drop a year ago, that was good enough for third place out of the 20 MSAs, showing how much the market has changed during that 12-month period.

“That is why you have to keep these things in perspective,” said Peter Niederman, CEO of Kentwood Real Estate.  That is true about the entire country’s housing market, noted David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “Even with concerns about near term developments, we recognize that the housing market is in better shape than this time last year,” Blitzer said.

Today’s report represents “old news,” for people who live and work in the Denver-area, but Case-Shiller is important for “seeing how Denver fares against other parts of the country,” Niederman said. And Niederman likes how Denver stacks up.

“I think the numbers are great,” Niederman said. “We are still holding steady. It seems like some of these other markets have these huge peaks and valleys, while we have sustainable growth. Our market has shown an increase in inventory, so it is not as robust as it has been. But I like where our market stands right now. I really do. If we were showing these huge increases, it would not be sustainable, and would not be good for the overall market, because that would mean it is becoming over-heated.”

Record-low rates key

And while the government’s tax credit program, which required buyers to place homes under contract by April 30 has ended, the super-low mortgage rates can save home buyers today far more than tax credits, valued up to $8,000, Niederman said. “The real story for buyers are these low mortgage rates,” Niederman said, hovering at historic lows around 4.2 percent.

Tom Cryer, a broker with Kentwood, noted that within a 500-mile radius, the Denver region is the most densely populated, which bodes well for a recovery. And it may come faster than many expect, he said.

“This market could really turn on a dime,” Cryer said. “It reminds me of 1989, when you could put an Aurora condo on your credit card. You could buy them for $5,000. Two years later, there was no supply left at all. Everyone was suffering from, what do you call it, GKY – Go Kick Yourself. I think people are going to be kicking themselves now, for not taking advantage of these low prices and unbelievably low mortgage rates.”

Still, given the economic realities, it is had to convince people that it makes sense to take a hit on their current home, and more than by making it up by buying a nicer home in the neighborhood where they really want to live. “I think there is just enough economic activity in Denver that keeps people from jumping off the ledge, but not enough to have them jumping with joy,” Cryer said.

Jeff Bernard, a long-time Realtor who now focuses on Internet marketing consulting for imediaWSI Inc., said he is surprised more people aren’t taking advantage of low rates and relatively low prices, which have made Denver homes extremely affordable by historic standards. ”It continues to baffle me is the fact that more people aren’t taking advantage of the housing affordability,” Bernard said.  Rates are so low today that it could drop a monthly principal and interest payment to about $800 from $1,500 for the same home in 2006, he said.

“The question I have for people is: “Would you rather be a buyer or a seller in today’s market? When I throw that question at people, every single one of them says they would rather be a buyer.”

Bernard said the political rhetoric that the housing market has collapsed and is never coming back, may be dissuading some people from taking advantage of today’s market condition. “Maybe we have to survive the elections, before the market returns,” he said. “Unfortunately, if everyone is believing allof the bad news they are hearing, especially from the political viewpoints, what that is doing to consumer confidence is killing it. The two driving factors for real estate are affordability and consumer confidence.”

National outlook

“The monthly composites cover June and the national index covers the second quarter, when the government’s program for first time home-buyers was winding down,” noted Blitzer, of Standard & Poor’s.

“While the numbers are upbeat, other more recent data on home sales and mortgages point to fewer gains ahead,” said Blitzer. He noted that  California’s cities “have moved from some of the hardest hit to three of the four leading cities based on year-over-year gains. Among the other hard hit cities, the news is also a bit encouraging – Las Vegas, however, remains among the weaker cities.” And 17 of the 20 MSAs and both composites “saw home prices increase in June over May – LasVegas was down 0.6%, Phoenix and Seattle were both flat. Through the second quarter, 15 of the 20 MSAs and both Composites have positive annual growth rates, and no market is registering a double-digit decline. The worry starts when you remember that the Homebuyers’ Tax Credit has expired, foreclosures are still at high levels, and July data on home sales and starts were very, very weak. The inventory of unsold homes and months’ supply data were particularly troubling. If this relative weakness in demand continues, it will likely filter through to home prices in coming months.” San Francisco showed the biggest one-year percentage gain, rising by 14.3 percent. San Diego was No. 2 at 11.2 percent. Phoenix, showed a 6.0 percent gain, while Las Vegas, declined by 5.2 percent.

Long-term, Denver’s housing market has gained about 29.19 percent from January 2000, compared with an overall appreciation of just under 48 percent for the 20 MSAs. Denver’s long-term appreciation is very close to the inflation rate during that period. Washington, D.C., showed the most appreciation, with home prices rising an average of 85.77 percent from January 2000. Detroit continued to be the only MSA to lose value over the long-term, with homes values falling by almost 30 percent since 2000.

Metropolitan AreaIncrease since 2000May to June Change1-Year Change
Atlanta9.74%1.7%2.0%
Boston57.83%1.2%3.4%
Charlotte17.24%0.7%-2.7%
Chicago24.9%2.5%-0.1%
Cleveland7.26%1.3%0.8%
Dallas21.14%1.0%1.2%
DENVER29.19%0.7%1.8%
Detroit-29.96%2.5%0.8%
Las Vegas1.77%-0.6%-5.2%
Los Angeles75.66%0.6%9.2%
Miami46.92%0.4%1.1%
Minneapolis25.91%2.5%10.7%
New York72.76%1.3%0.2%
Phoenix10.96%0.0%6.0%
Portland48.73%0.5%0.2%
San Diego63.82%0.4%11.2%
San Francisco42.55%0.3%14.3%
Seattle45.83%0.0%-1.8%
Tampa38.58%0.2%-1.6%
Washington, D.C.85.77%1.7%7.3%
Composite-1061.04%1.0%5.0%
Composite-2047.97%1.0%4.2%