The closely watched Case-Shiller index released today ranked Denver as the second-best metropolitan area of the 20 major cities it tracks.
Denver showed a 0.9 percent drop in December from December 2010, compared with a 4 percent year-over-year drop for all 20 MSAs. Only Detroit, with a 0.5 percent year-over-year gain, did better than Denver according to the S&P/Case-Shiller Price Indices.
“That is amazing that we are No. 2,” said independent real estate broker Gary Bauer.
“I’m not surprised that Detroit did so well, because it has nothing to do but go up.”
Bauer said that today’s report is the latest in a string of good news for the Denver-area housing market.
“I think what is more important than any individual data points is the consistent trends we are seeing across the board,” Bauer said. “Whether you are looking at Case-Shiller, Metrolist, the National Association of Realtors, Core Logic, or a number of other reports, they clearly show the rebound is happening in Denver. I think the low inventory and pent-up demand are going to continue to be the story in the Denver area during the next few months.”
Denver bucking national trend
Lane Hornung, president, CEO and co-founder of 8z Real Estate and COhomefinder.com, noted that the Case-Shiller report shows Denver bucking a national trend. David M. Blitzer, chairman of the Index Committee at S&P Indices, said that overall, the “housing market ended 2011 on a very disappointing note…Clearly, we have not seen any bottom yet and we may not have seen a bottom yet.”
Denver performed much better than the 20 MSAs, which overall showed a 4 percent year-over-year drop.
“Unlike the broader national indices, the Denver metro has not double-dipped and is not setting new lows,” Hornung said. ”In fact, both the non-seasonally adjusted and the seasonally adjusted index for Denver are within 0.4 percent of where they were a year ago. Yes, they are down, but…the gap is closing. Although the non-seasonal index for Denver took a step back from November to December, the seasonally adjusted index actually showed a month-over-month increase in home values. The overall trend is slowly rising home values in Denver, and I am sticking to my prediction that the index will post positive year over year appreciation for Denver in the first half of 2012. We will have to wait until the end of March to see our first 2012 data when the January figures are released.”
Blitzer, in a telephone interview with InsideRealEsateNews this morning, noted that from 1990 until its peak in August 2006, Denver home prices rose about half as much as in Miami. But in Denver, homes prices have fallen only about 14 percent from its peak, while Miami is down more than half from its peak.
“Denver is like Dallas,” Blitzer said during the interview. “Denver seems to have a stable economy and there is a lot of energy activity in Colorado and Denver. And it also it seems to be growing a regional financial center.”
Still, long-term housing appreciation in Denver has not matched a number of other cities, said Karl “Chip’ Case, a founder of the Case-Shiller index with economist Robert Schiller.
“Since 2000, Denver is up (about) 25 percent and Dallas is up 14 percent, so neither of them are off the charts,” Case said. He added that “one of the dumbest things” he ever did was buy a condo in Crested Butte in the mid-1980s.
But if he dumped his condo when the energy boom crashed a few years later, it was a mistake, said Peter Niederman, CEO of Kentwood Real Estate.
“If he held on to it, it would be worth a lot more than he paid in the ‘80s,” Niederman said. “If it would not be worth double what he paid for it, it would be pretty close.”
Niederman said he was pleased to see that Denver is continuing its pattern as ranking as one of the top cities tracked by Case-Shiller.
“I did hear on CNBC this morning that other cities are starting to see a low inventory,” Niederman said. “In Denver, that has been the trend for almost 12 months, so the other cities are starting to catch up with us.’
The inventory of unsold homes in Denver in January was down 41.6 percent in January 2011.
“I think in Denver that our February numbers are going to look strong, but based on the pipeline we are seeing, I think March is going to be very strong month.”
Low inventory, pent-up demand
Scott Webber, president and owner of Fuller Sotheby’s International Realty, said he was not surprised that Denver did so well on the Case-Shiller index, relative to the other 19 cities it tracks.
“That is certainly consistent with what we are seeing happening in Denver right now,” Webber said. “We had an open house on Sunday at at one time there were more than 150 people there.”
The Denver-area, he said, is benefitting from strong in-migration, an unemployment rate below the national average, relatively affordable housing, and a great quality of life. Denver increasingly is benefitting from companies and people moving here from out of state, he said.
“Definitely, Denver is a destination,” Webber said.
The low supply, combined with pent-up demand, is starting to change the Denver-area housing market, he said.
“We are starting to see a shift from from an extreme buyer’s market to one that is more in balance,” Webber said. “While it is still a buyer’s market overall, we are starting to see some pockets where it is approaching a seller’s market. In some neighborhoods that are close to downtown, we are increasingly seeing multiple offers.
“A number of people are really disappointed that they can’t find what they want or are getting out-bid for homes,” Webber said.
“In terms of prices, the housing market ended 2011 on a very disappointing note,” said David M. Blitzer, Chairman of the Index Committee at S&P Indices. “With this month’s report we saw all three composite hit new record lows. While we thought we saw some signs of stabilization in the middle of 2011, it appears that neither the economy nor consumer confidence was strong enough to move the market in a positive direction as the year ended.
“After a prior three years of accelerated decline, the past two years has been a story of a housing market that is bottoming out but has not yet stabilized. Up until today’s report we had believed the crisis lows for the composites were behind us, with the 10-City Composite originally hitting a low in April 2009 and the 20-City Composite in March 2011. Now it looks like neither was the case, as both hit new record lows in December 2011. The National Composite fell by 3.8% in the fourth quarter alone, and is down 33.8% from its 2nd quarter 2006 peak. It also recorded a new record low.
Bleak national outlook
Nationally, the housing picture was much bleaker than in Denver.
“In terms of prices, the housing market ended 2011 on a very disappointing note,” Blitzer said. “With this month’s report we saw all three composite hit new record lows. While we thought we saw some signs of stabilization in the middle of 2011, it appears that neither the economy nor consumer confidence was strong enough to move the market in a positive direction as the year ended.
“After a prior three years of accelerated decline, the past two years has been a story of a housing market that is bottoming out but has not yet stabilized,” Blitzer continued. “Up until today’s report we had believed the crisis lows for the composites were behind us, with the 10-City Composite originally hitting a low in April 2009 and the 20-City Composite in March 2011. Now it looks like neither was the case, as both hit new record lows in December 2011. The National Composite fell by 3.8 percent in the fourth quarter alone, and is down 33.8 percent from its 2nd quarter 2006 peak. It also recorded a new record low.
“In general, most of the regions also posted weak data in December. Eighteen of the cities saw average home prices fall in December over November. Seventeen of the cities have seen monthly declines for at least three consecutive months. In addition to both monthly composites, 10 of the cities saw home prices fall by more than 1.0 percent during the month of December. The pick-up in the economy has simply not been strong enough to keep home prices stabilized. If anything it looks like we might have reentered a period of decline as we begin 2012.
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