Do you think Denver’s market has bottomed? Vote below.
The Denver-area housing market lost 2.1 percent in value in July from July 2010, but that was good enough for fourth place of the 20 major metropolitan areas tracked in the closely followed Case-Shiller report released today.
The Denver metropolitan statistical area was almost 50 percent below the overall drop of 4.1 percent for the 20 MSAs. Minneapolis led the decline, falling 9.1 percent on a year-over-year basis.
July marked the third consecutive month that Denver ranked in the top 5 cities on the influential S&P/Case-Shiller Home Price Indices.
“On a year-over-year basis, this is telling me Denver is very stable,” said Peter Niederman, CEO of the Kentwood Co. “We are hanging in the top 5. It is a nice place to be. We did not see the high-highs and we are not seeing the low-lows. We are maintaining a nice, stable environment.”
That is preferable than being like the stock market, with its huge, recent swings, he said.
“I’m glad that we are not all over the map,” Niederman said. “I would be concerned if one month we were 13th, and the next month we were 8th, and the following month we were No 3.”
Niederman is still hoping that the overall Denver area housing market this year will end up 3 percent to 5 percent above 2010, both in prices and the number of sales.
But he said there are many factors outside of the local market’s control that can impact local housing markets, including Denver.
“You look at the political environment with Democrats and Republicans positioning themselves; who will be the Republican candidate for president; what the Obama Administration is offering to try to increase the number of jobs and lower unemployment; and the global economies, such as what is happening in Europe and China. Those type of things may derail the best forecast. They can help or hurt housing.”
Rates at historic lows
One positive for the housing market has been super-low mortgage rates, now hovering at 4 percent or below.
“We had a broker in our office who recently sold a home for a woman who bought it in 1959,” Niederman said. “She had a 4.75 percent interest rate when she purchased it. So 52 year later, rates are lower. Who would have ever imagined that?”
However, because the Fed has indicated it will keep rates low for an extended period of time, consumers feel no pressure to buy today, he said.
“What creates an urgency, is when people feel like rates are about to rise and they want to lock-in rates before they do,” Niederman said. “However, when the U.S. economy improves – not if, but when – there is plenty of room for rates to rise from today’s lows, and still be very attractive.”
Independent broker Gary Bauer echoed Niederman’s observations.
“To re-emphasize what Peter said, the Denver market has been very consistent,” Bauer said. “Yes, we have and our ups and downs, our opportunities and challenges. But our swings have not been as dramatic as in other markets. We have had a very solid, consistent marketplace. I think today’s Case-Shiller report is very good news.”
Leilani Renteria, a broker with Fuller Sotheby’s International Realty, said there is a shortage of homes on the market. The number of unsold homes on the Denver market in August was down 23 percent from August 2010 and the lowest level for an August in more than a decade.
“I have several clients who are developers and also do restorations, and they can’t find any inventory,” Renteria said. “I think what that is showing me is that the inventory of distressed properties have been purchased, and this is helping the whole market in general. I think if you are looking at our market on a neighborhood-to-neighborhood basis, it can give you a glimpse of what to expect for the overall area. For example, there is very little inventor in areas like the Highland.”
She said she knows people who are putting their homes on the market now, a seasonally slow period, who in the past would have waited.
“I have a lot of clients who were going to wait until the spring and are listing now, because interest rates are so low and there is so little inventory on the market,” she said.
13 months of YOY declines
However, while the Denver areas’s housing market is better than most, it still has been showing a long-term trend of year-over-year declines, noted Ryan McMaken, of the Colorado Division of Housing.
“This is the 13th month in a row that Denver has shown a decline on a year-over-year basis,” McMaken said. “Denver has been negative every month since June 2010. We have not a positive year-over-year month since June 2010, when we were still benefitting from the tax credits.”
In July 2010, Denver showed only a 0.1 percent year-0ver-year decline, but was ranked No. 11th by Case-Shiller, because so many other metropolitan statistical areas did better.
Nationally, the overall Case-Shiller index has been showing 10 months of consecutive year-over-year declines, McMaken said. However, Denver’s slightly worse track record probably is not significant, he added.
“Basically, Denver mirrors what most of the country is going for, with the exception of Washington, D.C., which consistently has shown increases,” McMaken said. “However, when you look at Denver compared to other cities, before the bust, their increases were larger, and after the housing bust, their declines were greater.”
The Case-Shiller data is consistent with other national and regional reports, such as those released by CoreLogic, the Federal Housing Finance Agency, and the Colorado Association of Realtors, he said.
Denver unchanged from June
On a month-to-month basis, Denver was unchanged from June to July, while overall, the 20 cities tracked by Case-Shiller rose 0.9 percent during that period.
Only Phoenix and Las Vegas performed worse than Denver, falling 0.2 percent and 0.1 percent, respectively.
“Of course it’s only one data point, but the fact that the index was exactly flat month over month, out to two decimal points no less, confirms the assertion that our market has bottomed,” said Lane Hornung, president and co-founder of 8z Real Estate and COhomefinder.com.
“The bottom isn’t always so even with perfectly flat data points, and more often has monthly bumps of plus or minus 2 percent or 3 percent,” Hornung continued. “But looking back over the last year since the tax credit expired, the index has remained in a very narrow range indicating a stable, recovering market.”
National snapshot improves
“With July’s data we are seeing not only anticipated monthly increases, but some fairly broad improvement in the annual rates of change in home prices,” says David M. Blitzer, Chairman of the Index Committee at S&P Indices. “This is still a seasonal period of stronger demand for houses, so monthly price increases are expected and were seen in 17 of the 20 cities. The exceptions were Las Vegas and Phoenix where prices fell, while Denver was flat. The better news is that 14 of 20 cities and both Composites saw their annual rates of change improve in July.
“While we have now seen four consecutive months of generally increasing prices, we do know that we are still far from a sustained recovery. Eighteen of the 20 cities and both Composites are showing that home prices are still below where they were a year ago. The 10-City Composite is down 3.7% and the 20-City is down 4.1% compared to July 2010. Continued increases in home prices through the end of the year and better annual results must materialize before we can confirm a housing market recovery.
“As with May and June’s reports, we saw some unusually large revisions across some of the MSAs. In particular, Detroit was most affected in July, with the revisions showing a much healthier market than previously thought. Our sales pairs data indicate that this market reported a lot more sales in May and June, which caused the revisions. As we have indicated before, when sales volumes are relatively low and the ratios of distressed-to-non-distressed sales are changing rapidly, revisions are more noticeable. These factors likely contributed to the revisions we saw not just in Detroit, but in many of the MSAs over the past few reports.
“Other recent housing statistics show that single-family housing starts were down slightly in August, and are about 2% below their year ago level; and these levels are at 30-year lows,” he continued. “Existing-home sales, however, were up in August and are about 20% above their August 2010 level. The S&P/Experian Consumer Credit Default indices showed a continuing decline in mortgage default rates, a two-year trend. However, if you look at the state of the overall economy and, in particular, the recent large decline in consumer confidence, these combined statistics continue to indicate that the housing market is still bottoming and has not turned around.”
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