John Rebchook is a former Rocky Mountain News reporter with more than 30 years of experience in writing and communications... Home values in the Denver-area have fallen to almost an 11-year low, according to a report released today by Zillow.com.
The national report by the Seattle-based real estate website, places the value of a typical Denver-area home at the end of March at $192,300, which Zillow says is back to December 2000 levels. Metrolist, by contrast, earlier reported that the average price of all homes sold in the Denver area in March was $249,644.
When adjusted for inflation, a home that sold for $192,300 in 2000 would cost $249,551 in today’s dollars.
According to Metrolist, the average price of all homes sold in December 2000 in the Denver area was $217,211 – or $281,879 in today’s dollars.
Not quite as grim as Zillow says
Mike Rinner, of the Genesis Group, which tracks the new and resale housing market along the Front Range, said that he doesn’t think the Denver market is quite as bad as Zillow shows.
“I think that is a bit aggressive,” Rinner said. “I think we are closer to 2003-2004 levels, than 2000-2001 levels.”
Independent broker Gary Bauer agreed with Rinner. “I think we have gotten down to the 2004 levels and we may be in double-dip territory, but I don’t think we have ever been back to to 2000 levels,” since the housing crisis began about four years ago, Bauer said.
Zillow on target
But Jason Miller, owner of Milan Realty, said that the Zillow numbers ring true.
“I think this is the one area that Zillow can report their data objectively,” Miller said. “A home either sold for more than an owner paid or not.”
While Zillow is not perfect, Miller said he is not as quick to “throw Zillow under the bus,” as many fellow Realtors.
Homeowners drowning?
Zillow also said that 41 percent of Denver-area single family homes with mortgages are “underwater,” that is, their mortgages are worth more than mortgages, compared with 28.4 percent for the overall country.
At the same time, Denver-area homes are down 17.2 percent from their peak in June 2006, compared with a 29.5 percent drop for the nation.
Neither Rinner nor Bauer are buying Zillow’s analysis of the number of underwater homeowners in the Denver area.
“That doesn’t make any sense,” Rinner said. “How can we have so many more homes under water than the national average, but be so much lower off the peak than they are nationally?”
He said that would only be the case if Denver-area borrowers took out a disproportionate number of subprime-type mortgages that are still working their way through the system.
On the other hand, Rinner is not arguing that the overall trends being reported by Zillow are wrong.
Short sales driving down prices
The overall market does show signs of softening, he said. Rinner said one reason seems to be due to the increasing number of short sales in the Denver area. A short sale is when a lender takes less than the mortgage amount.
Rinner has heard recently that banks are more aggressive than ever to do a short sale, in order to avoid the cost, time and hassle of a foreclosure.
“I think that is part of an overall decline in prices, but I don’t know how big of a factor it is,” Rinner said.
Area M-0-M Change Q-0-Q Change Y-O-Y Change March
Price Change U.S. -1.0% -3.0% -8.2% $169,600
Price Change Denver
-0.8% -2.7% -9.6% $192,300
Homes Sold U.S. 30.2% 4.8% -14.1% 282,414
Homes Sold Denver
46.6% 15.8% -17.0% 4,324
Foreclosure re-sales
U.S.
1.4% 5.1% 6.8% 23.74%
Foreclosure re-sales
Denvr0.3% 4.4% 6.7% 32.33%
Sold for a loss U.S. 0.7% 4.5% 6.5% 37.58%
Sold for a loss Denver 0.2% 3.9% 5.4% 34.32%
Sales Price PSF U.S. -0.9% -2.8% -0.5% $105
Sales Price PSF Denver -0.8% -5.6% -8.7% $115
Decreasing Values U.S. 1.4% 5.3% 19.8% 74.47%
Decreasing Values Denver -1.3% 17.5% 55.8% 85.68%
Increasing Values U.S. -1.3% -4.5% -18.8% 19.88%
Increasing Values Denver -0.3% -14.1% -52.3% 9.72%
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Just to refresh all the Realtors’ memories, prices in Denver did not rise very much between 9-11-2001 and 2004( at most 10%). Why do you find it so hard to beleive we could be back to December 2001 prices?
Speaking for faulty data, you might want to throw these people “under the bus”.
http://online.wsj.com/article/SB10001424052748704476604576158452087956150.html?mod=WSJEUROPE_hpp_sections_news
Zillow also said that 41 percent of Denver-area single family homes with mortgages are “underwater,” that is, their mortgages are worth more than mortgages, compared with 28.4 percent for the overall country.
At the same time, Denver-area homes are down 17.2 percent from their peak in June 2006, compared with a 29.5 percent drop for the nation.
Neither Rinner nor Bauer are buying Zillow’s analysis of the number of underwater homeowners in the Denver area.
“That doesn’t make any sense,” Rinner said. “How can we have so many more homes under water than the national average, but be so much lower off the peak than they are nationally?”
Answer:
Not all homeowner nationwide purchased or refinanced at the peak of the market. Denver has spent a longer duration of months closer to the bottom of the range than other cities. Since Denver never had the run up in prices more people are underwater. In Denver, on average, almost every buyer in the last 10 years home is worth less than what they paid. In other, “high flying” market, it might only be the last 5 year \buyers have seen price declines. In the “high flying” the homeowner who purchased in the last 5 year is in a much worse negative equity position. The good news for Denver is, homeowner have smaller amount of negative equity, the bad news is, there are more homeowner with negative equity. Look at Case Shiller data for appreciation since Jan 2000, Denver is up 20% and the 10 city composite is up 52%.
Can someone please explain to me why we use the Metrolist Average Price data as gospel every month? It’s just a 4th grade math calculation, you take the toal dollar volume sold and divide it by the total number of sales. It does not take into account any other variables(e.g. size, area, condition, low end, high end). Zillow and Case Shiller use complicated algorithms that compare each home sold(paired sales) developed by PHD’s from Stanford and MIT. You know, the same types that developed that website Google. Yes, Google, the same site you type in a work and in seconds it uses algorithms to search the internet for what you are looking for. Using Metrolist data for determine market conditions now is like going to the library, finding the card catalog, utilizing the Dewey decimal system to find the Encyclopedia Britannica to research. Technology has come a long way. We should use it.
Does anyone disagree? I’m sure the people still using “The Book” for selling real estate might not agree with me(unless you have been in real estate over 15 year, you have no idea what I’m talking about).
In case you don’t believe me. Judge for yourself-
Metrolist Monthly Average Price 4th grade math calculation-
Total monthly sales volume divided by the total number of sales.
Case Shiller Methodology-
http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&blobcol=urldata&blobtable=MungoBlobs&blobheadervalue2=inline%3B+filename%3DMethdology_SP_CS_Home_Price_Indices_Web.pdf&blobheadername2=Content-Disposition&blobheadervalue1=application%2Fpdf&blobkey=id&blobheadername1=content-type&blobwhere=1243624745188&blobheadervalue3=UTF-8
Which one seems more accurate in determinig the true condition of the market?
I’ll believe Zillow when they’re able to show where their data comes from. At this point, all I see is how they “price” my homes – which are anywhere from 20% above to 20% below what they’re actually worth.
As for the agents Rinner, Bauer, and Miller above, they do not offer any backup for their “opinions,” and therefore I can’t put too much into their statements. Sure, I know what our market feels like here, but I’d never speak to the specifics unless I had hard figures to back up what I said.
Zillow has been proven time and time again to be off-base or completely incorrect. I’m tired of using data from a faulty source and calling it gospel.
@Sean
I completely agree with you about using Zillow to determine the value of any one particular home. There is a 20%+/- variance in Zillow’s reported values, but I think when looking at an aggregate price of a MSA, they are as good as any source out there. It is very much like life insurance actuarial work. It is very difficult to determine the life expectancy of any one individual, but when you take 100,000′s of people, the data smoothes itself out. When Zillow averages the values of 100,000′s of home, the variances shrink exponentially. Case Shiller and Zillow are within 2%-5% of each over a 10 year period. Zillow has March prices at December of 2000, Case Shiller Feb report at June 2001(Case Shiller uses a 3 month average for there report, so Feb report reflect home prices in the mid point of the report which is January sales. My guess is by the April 2011 report case shiller will confirm the Zillow numbers).
We are limited on the data sources we can use to determine home prices of MSA’s. We can keep using 4th grade math and Realtors’ anecdotal “opinions” or new algorithmic computer model.
My guess is the computer models will turn out to be more accurate. We shall see.
@ Sean
In your opinion, what souce would you use to best deterine average sales price for a MSA in order to compare it to another point in time?