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The Denver-area housing market ended 2010 as the best-performing housing market between the coasts, shows the closely watched S&P/Case-Shiller Home Price Indices released today.
Denver-area homes on average lost 2.4 percent in December from December 2009, shows the report that tracks 20 major metropolitan statistical areas. The decline was the same as the overall drop for all 20 cities and Denver was the seventh best performing city in the index on a year-over-year basis. Washington, D.C. was No. 1, with homes rising 4.1 percent. San Diego, the only other city in positive territory, showed a 1.7 percent increase. San Francisco, Los Angeles, Boston, and New York also did better than Denver. From November to December, Denver showed a 0.7 percent drop, compared to a 1 percent drop for all 20 cities.
Denver in a good place
“It really sounds like a pretty good win for Denver,” said Peter Niederman, CEO of the Kentwood Co. “It sounds like Denver fared pretty well. I think Denver is in a pretty good spot right now. We’re seeing good traffic and showings, although they are not turning into contracts as much as we had hoped to see. Still, traffic is a leading indicator. And we are seeing traffic at all price points. I still hold to my prediction that when the year is over, we will be up 3 percent to 5 percent from last year. The first quarter and second quarter will be kind of hard to compare to Q1 and Q2 of last year, because we had the tax incentives in the first part of 2010, while we don’t have them anymore.”
More than anything, what will help Denver and the nation’s housing market is job growth and a drop in the unemployment rate, he said. “When there is job growth, people will feel like there is more security in their jobs,” Niederman said. “Until then, we will kind of bounce around at the bottom. Sometimes we will drift a little bit lower and sometimes we will drift a bit higher.”
Lane Hornung, president of 8z Real Estate (a sponsor of InsideRealEstateNews), noted that giving up 0.7 percent in December from November is “not great, but not a calamity, either. It’s less than the 1.2 percent drop in the previous month, making us one of six cities showing improvements in their annual growth rates,” according to Case-Shiller. “Although being “less negative” is certainly nothing to shout about.”
Still, looking at the bigger picture, Hornung noted that Case-Shiller’s data shows the Denver market is still 3.2 percent above its low in February 2009, “giving us a bit of wiggle room to avoid the double dip that 11 other cities already are experiencing.”
Bouncing along the bottom
Hornung said that the Denver-area market continues to bounce along the bottom. He said the 1 to 4 percentage point swings that Denver has been experiencing – both positive and negative – for about the past two years “will continue to be the norm as the market stabilizes without the tax credit ‘training wheels.’”
Chris Behrens, a broker with New Era Realty Inc., said he is noticing a lot of people investigating the Denver area for homes who are re-locating from other states, particularly Texas and the South. Many of the Texans are in the energy business. He estimates 30 percent to 35 percent of his business is coming from people relocating from out of state.
“I see people who want to be in this part of the country,” Behrens said. “They see us having a super-high quality of life. Our weather is moderate in comparison to many other places of the country, and there is a lot do do here.”
Texans coming to Denver
He said that prospective buyers from Texas and southern states find Denver homes expensive, “but when I’m dealing with people from the East or West coasts, they think everything is on sale here.”
But even some Texans have hit pay dirt in the Denver housing market. Behrens said that he was working with a senior engineer for an energy company about 30 miles outside of Houston, who planned to buy in Denver in about three years when he retired.
“They came out here on a scouting mission, and based on today’s prices and interest rates, they decided to buy a luxury home – in the $1 million range – in the Bow Mar area,” Behrens said. “They moved their buying plan up by three years. He thought he got a screaming deal in a luxury home and the seller was happy to get out of it. Because they got such a good deal, they are willing to maintain two homes for a while.”
National view weak
From a national perspective, David M. Blitzer, chairman of the Index Committee at Standard & Poor’s, was not very bullish.
“We ended 2010 with a weak report,” Blitzer said. “The National Index (at Case-Shiller) is down 4.1% from the fourth quarter of 2009 and 18 of 20 cities are down over the last 12 months. Both monthly Composites and the National Index are moving closer to their 2009 troughs. The National Index is within a percentage point of the low it set in the first quarter of 2009. Despite improvements in the overall economy, housing continues to drift lower and weaker.
“Unlike the 2006 to 2009 period when all cities saw prices move together, we see some differing stories around the country,” Blitzer continued. “California is doing better with gains from their low points in Los Angeles, San Diego and San Francisco. At the other end is the Sun Belt – Las Vegas, Miami, Phoenix and Tampa. All four made new lows in December. Also seeing renewed weakness are some cities that were among the last to reach their peaks including Atlanta, Charlotte, Portland and Seattle, where news lows were also seen. Dallas, which peaked late, has so far stayed above its low marked in February 2009.”
The report shows that the 10- and 20-City Composite indices remain above their spring 2009 lows; however, 11 markets – Atlanta, Charlotte, Chicago, Detroit, Las Vegas, Miami, New York, Phoenix, Portland, Seattle and Tampa – hit their lowest levels since home prices peaked in 2006 and 2007. More markets hit new lows in each of the past three months.
“Looking deeper into the monthly data, 19 MSAs and both Composites were down in December over November,” Blitzer said. “The only one which wasn’t was Washington DC, up 0.3%. With December 2010 index levels of 99.73 and 99.48, respectively, Cleveland and Las Vegas have the dubious distinction of average home prices now below their January 2000 levels. Detroit was the only market that was in that group prior to December.”
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