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Case-Shiller: Denver No.9


The Denver-area housing market was near the middle of the pack in September, according to the closely watched  S&P/Case Shiller home report released today.

Denver ranked ninth  out of 20 cities tracked in the S&P/Case-Shiller Home Price Indices in the 12-month period ending in September.   Overall, the 20 metropolitan statistical areas tracked by the S&P/ Case-Shiller Home Price Indices showed  a 0.6 percent one-year gain. On a month-to-month basis,  Denver tied with three other cities for eighth place, showing an average drop of 1 percent  from August, compared with a 0.7 percent drop for all 20 cities. Overall, the 20 cities showed an average gain of 0.6% from September 2009. San Francisco showed the biggest gain at 5.5 percent, while Chicago showed the biggest drop, falling by an average of 5.6%.

Denver: No peaks and valleys

Peter Niederman, CEO of the Kentwood Co., said the value of Case-Shiller is to see how the Denver market is faring against other cities.

“The information is 60 days old,” Niederman said. “They are telling us what we already know. It’s only important as far as how we are stacking up against other cities.”

Niederman said Denver is about where he would expect, in that regard.  The Denver market continues to trade around the same narrow range, as far as year-over-year and month-to-month percentage changes, he noted.  “It’s really nothing to be alarmed about,” Niederman said. Indeed, he said if the California cities are excluded from the mix, Denver is doing quite well on a national level.

He said all indications are that it will be more of the same in 2011. “No one I speak to, whether it is Realtors, home builders, lenders or anyone else, thinks that home prices will have a big setback in 2011,” Niederman said. “The market might be flat in 2011, but no one is predicting it will be worse.”

Niederman said it is surprising that more people are not taking advantage of mortgage rates, which remain near record lows.

Jobs, jobs, jobs

“We have these unbelievable, tremendously low interest rates, and people still are not pulling the trigger,” Niederman said. “That tells me that the underlying reason is there is still not consumer confidence. And consumer confidence means jobs. It’s all about jobs. That is what it really comes down to. When people are more secure in their jobs, more people will be buying homes.”

Independent broker and consultant Gary Bauer, who prepares his own monthly analysis based on Metrolist data, agreed with Niederman that the Case-Shiller report held  no surprises for the Denver area. “Most people were not focused on buying in September,” both for seasonal reasons, as well as for economic reasons, he said.

Outside of Denver, Bauer was surprised that Chicago saw a big drop, but was not surprised that San Francisco once again led the 20 cities. Denver, Bauer and others note, did not have the huge price  increases other cities experienced during the housing boom years, and was not hammered by huge price drops during the bust that cities in California, Florida, Nevada and Arizona experienced. Over the Thanksgiving holiday, while in Dallas, Bauer met a San Francisco homeowner who said he is pleased that prices are rebounding in San Francisco, but also is puzzled how that it is possible, given the economy.

In Dallas, Bauer looked at a relatively new condo with about 2,200 square feet with a three-car garage that had been priced had $400,000, but now is listed at $275,000, about a 31 percent drop. “My perception is that the Dallas housing market is taking a bigger haircut on prices than in Denver,” Bauer said. Case-Shiller would seem to bear that out. In Dallas, year-over-year prices fell by 2.6 percent.

Long-term, Denver home price appreciation also is in the middle of the pack. Since January 2000 until the end of September of this year, home prices in the Denver area have risen an average of 27.32 percent, ranking Denver No. 10 of the 20 cities. Denver’s appreciation is almost exactly the same as the inflation rate. The overall appreciation during that period for the 20 metropolitan statistical areas was 47.5 percent.

National scene

On the national level, David M. Blitzer, chairman of the Index Committee at Standard & Poor’s described the market this way:  “Another weak report; weaker than last month.” Blitzer also noted that the  “national index is down 1.5 percent  from the third quarter of last year and 15 of 20 cities are down over the last 12 months. Other than Tampa, FL, there are no new lows this month but many analysts will argue that a double dip will be confirmed before spring. While some of the bad numbers may reflect the end of the government’s tax incentive for first time home-buyers, there are other problems weighing on the housing market. The  national economy is certainly the number one issue for housing. Additionally, there is a large supply of houses on the market and further, hidden, supply due to delinquent mortgages, pending foreclosures or vacant homes. New  construction is running at less than half the pace needed to meet normal demand, so a sustained recovery could be a ways off.”

He didn’t find many bright spots on a month-to-month basis, either.

“Looking deeper into the data, in the monthly indices, 18 MSAs and both Composites were down in September over August,” Blitzer said. “This is worse than August when 15 were down month-to-month. The only two which weren’t down in September were Las Vegas, which managed to stay a touch above the low set in July, and Washington, D.C. Overall, there are few, if any, good numbers in this month’s data.”

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