The Denver-area housing market was the third-best performing metropolitan statistical area tracked by the closely watched S&P/Case-Shiller index released today.
The overal Denver housing market showed a 1.6 percent decrease in August, less than half the 3.8 composite drop for the 20 major metropolitan areas tracked by Case-Shiller. On a month-to-month basis, Denver tied for fourth place, showing a 0.4 percent gain, the fourth consecutive month showing a gain from the previous month.
However, Peter Niederman, CEO of the Kentwood Real Estate Market, said “one month does not make a market,” and there can be a lot of fluctuations on a monthly basis, so a year-over-year change is a better indicator of the direction of the market.
And he likes how Denver stacks up to the rest of the country.
“Denver in the top 3? That is pretty darn good,” Neiderman said. “What is encouraging to me is that Denver is consistently in the top quartile on a year-over-year basis. That makes me happy.”
On the other hand, the 1.6 percent drop marks the 14th consecutive year-over-year decline from the same month in the previous year. However, the 1.6 percent drop was the smallest percentage drop in more than a year. The last time the year-over-year percentage drop was smaller was in August 2010, when home prices fell 1.2 percent.
Don’t break out the fireworks
“This is nothing we would set fireworks off for,” Niederman said. “The housing market is still in a funk. But what this tells me is that relative to the rest of the country, Denver is in pretty good shape. I think Denver is poised to continue to out-perform most of the country.”
The only two markets that out-performed Denver on a year-over-year basis were Detroit and Washington, D.C. They also were the only two markets to be in positive territory, showing a gain of 2.7 percent and 0.3 percent, respectively.
“What they are doing in Detroit is pretty dynamic,” said independent Denver Realtor Gary Bauer. “The are bulldozing entire streets and starting from scratch. It is a place that that has no place to go but up.”
Bauer shares Niederman’s enthusiasm for Denver’s showing in the Case-Shiller report.
“It is extremely good news to hear that Denver continues to maintain its position in this particular report,” Bauer said.
Lane Hornung, president, CEO and co-founder of 8z Real Estate, summed up the Case-Shiller report with one word: “Stable.”
Hornung said the Denver-area market is, “Not crashing, not hot…just stable. We will see if the strength in the lower price segments can work their way up to the higher price points.”
Meanwhile, the August report may have put to rest fears from earlier this year that the market was going to re-visit its earlier lows, as a number of other markets did across the country, before bouncing back slightly.
Double-dip, shadow markets haven’t materialized
“The chatter about a double-dip has abated for now, as we are more than 5 percent above our post-peak low set in February 2009,” Hornung pointed out.
Niederman also noted that earlier fears that a “shadow market” of unsold homes held by banks would blanket the market, increasing the unsold inventory and driving down prices, also never materialized.
“Where is this shadow inventory everyone was so concerned about? Instead, the inventory is down 26.5 percent,” he said. “And prices have held steady.”
Earlier this year, Niederman predicted that he expected that 2011 will out-perform 2010 by 3 percent to 5 percent in both closed units and dollar volume. At the end of September, the area was down about 1 percent from the first nine months in 2010, by both measures. Now that the year is drawing to a close, he said he thinks the year-over-year market likely will be closer to 3 percent, barring some global crisis that hammers the housing market in Denver and nationwide.
Bauer said that despite mortgage rates still hovering near historic lows of about 4 percent for a 30-year, fixed-rate loan, he doesn’t expect a stronger than usual fourth quarter, when sales tend to drop for seasonal reasons. He admits, however, he wouldn’t mind being wrong.
“I’d be very happy if people took advantage of these low mortgage rates and affordable prices,” and went on a year-end home-buying spree, “but I don’t think is it going to happen.”
Meanwhile, nationally, there is a “glimmer of hope,” said David M. Blitzer, chairman of the Index Committee at S&P Indices. As Hornung said the for the Denver market, Blitzer also sees the nation’s housing market stabilizing.
“With 16 of 20 cities and both Composites seeing their annual rates of change improve in August, we see a modest glimmer of hope with these data,” Blitzer said.
“There was some weakness in the monthly statistics, as 10 of the cities post price declines in August over July,” Blitzer said. “And even though the annual rates are largely improving, 18 MSAs and both Composites are still negative. Nationally, home prices are still below where they were a year ago. The 10-City Composite is down 3.5% and the 20-City is down 3.8% compared to August 2010.
“In the August data, the good news is continued improvement in the annual rates of change in home prices. In spring and summer’s seasonally strong period for housing demand, we cautioned that monthly increases in prices had to be paired with improvement in annual rates before anyone could declare that the market might be stabilizing. As of August 2011, the crisis low for the 10-City Composite was back in April 2009; whereas it was a more recent March 2011 for the 20-City Composite. Both are about 3.9 percent above their relative lows. “The Midwest is one region that really stands out in terms of recent relative strength. Chicago, Detroit and Minneapolis have all posted very sharp monthly increases going back to May. These markets were some of the weakest during the crisis, particularly Detroit. But as of August 2011, Detroit is the healthiest when viewed on an annual basis. Prices there are still back to their 1995 levels, but the recent pickup in the U.S. auto industry may finally be helping.”
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