Home prices in the Denver area rose by 2.8 percent in April from April 2011, ranking it No. 4 in the closely watched Case-Shiller index released today.
The gain was the biggest increase in Denver in 23 months and far out-paced the 1.9 percent drop overall for the 20 metropolitan statistical areas tracked by the S&P/Case-Shiller Home Price Indices. In May 2010, the last time the market showed a bigger gain, Denver home prices rose by 3.6 percent. At that time, the federal government was offering tax credits for qualified home buyers.
“The Case Shiller data reaffirms what those of us in the market are already well aware of – prices are rising,” said Lane Hornung, CEO, president and co-founder of 8z Real Estate and COhomefinder.com.
“We are now almost 5 percent above our post-peak low,” Hornung added. “Due to the acute lack of inventory, sellers are retaking the upper-hand in the market and pricing accordingly.”
The number of unsold homes on the market is at a 12-year low.
Denver needs inventory
“This market needs more inventory to meet existing demand and shift us toward equilibrium – six months of inventory rather than our current three months,” Hornung said. “As more potential sellers realize that the market is actually quite strong and their home may be worth than they think, we should see more quality listings come on the market.”
Independent broker Gary Bauer said it is not just the weather that is sizzling.
“The home market is hot and continues to get hotter,” Bauer said. “The strength and stability is showing in these reports.”
Peter Niederman, CEO the Kentwood Co., said today’s Case-Shiller report continues a trend for the Denver area.
Niederman: Prefers slow and steady to volatility
“Denver, again, showed steady, not high but not low increases,” Niederman said. “Slow and steady wins the race.”
He said he would rather have a market like Denver than Phoenix, which topped the list with an 8.6 percent, year-over-year gain, but in many previous months had shown huge declines.
“That is the type of volatility we don’t have in Denver,” Niederman said. “I wouldn’t want to be the 20th market in some months, and No. 1 in other months.”
He added that he thinks that Denver is one of the few cities that has consistently been in the top five markets ranked by Case-Shiller.
However, Niederman said he does agree with some other observers that there is a “shadow market” of inventory not yet on the market.
“I do think there is a backlog of distressed properties that have not yet come on the market,” Niederman said. Those would include foreclosures owned by banks, called REOs; short sales, in which sellers and banks accept less than the mortgage amount for a home; homeowners who are 30, 60 or 90 days behind on their mortgage payments; and those stuck with above-average mortgage rates because of previously loose underwriting, he said.
Shadow market welcomed
Chris Mygatt, president of Coldwell Banker Colorado, said he would welcome shadow inventory.
“If it really exists, I would be disappointed that banks are not putting inventory that they hold on the market in a methodical manner,” Mygatt said. “Under these market conditions, there is no logical reason to be holding inventory and not be selling it. It doesn’t make sense. I would have to question the decision of any bank that owned real estate and was not putting it on the market.”
Also, he said appreciating home prices will bail out a lot of homeowners who are, or believe they are, under water – that is, their homes are worth less than their mortgages.
“Every time there is a 1 percent increase in home prices, thousands of homeowners who had homes that they couldn’t have sold are now able to get back into the market,” Mygatt said. “You might be considering giving your home back to the bank and all of a sudden learn that one or two homes down the street from you have sold for more than what you owe on your home. That may mean that you can finally sell your home.”
Mygatt said today’s Case-Shiller report supports the strong market results for May released recently by Metrolist.
“They are both showing a very strong trend,” Mygatt said. “Most specifically, I think that is especially true in the luxury market. In the month of May, homes sales of $500,000 and above were 50 percent higher than in May 2011. I think that is really showing that people with money are feeling now is the time to buy before they start seeing price increases and are moving back into the market.”
Nationally, the Case-Shiller report represented good news for the housing market.
“With April 2012 data, we finally saw some rising home prices,” said David M. Blitzer, Chairman of the Index Committee at S&P Indices.
“On a monthly basis, 19 of the 20 MSAs and both composites rose in April over March,” Blitzer said. “Detroit was the only city that saw prices fall, down 3.6 percent. In addition, 18 of the 20 MSAs and both composites saw better annual rates of return.”
He said the increases are welcome news.
“It has been a long time since we enjoyed such broad-based gains. While one month does not make a trend, particularly during seasonally strong buying months, the combination of rising positive monthly index levels and improving annual returns is a good sign.”
Blitzer said the gains were not unexpected.
“We were hoping to see some improvement in April,” Blitzer said. “First, changes in home prices are very seasonal, with the spring and early summer being the most active buying months. Second, while not as strong and we believe less reliable, the seasonally adjusted data were also largely positive, a possible sign that the increase in prices may be due to more than just the expected surge in spring sales. Additionally, the last few months have seen increased sales and housing starts amidst a lot of talk of better housing markets, so some price gains were anticipated.”
MSA Change from January 2000 October-November (non-seasonly adjusted) 1-Year Change from November
Atlanta -3.32% 0.1% 7.6%
Boston 53.74% -0.9% 2.3%
Charlotte 15.41% -0.3% 5.1%
Chicago 13.35% -1.3% 0.8%
Cleveland 0.68% -0.8% 1.8%
Dallas 20.55% -0.1% 5.7%
DENVER 34.50% 0.4% 7.8%
Detroit -19.67% -0.3% 11.9%
Las Vegas 0.56% 0.4% 10.0%
Los Angeles 75.58% 0.4% 7.7%
Miami 51.13% 0.8% 9.9%
Minneapolis 26.41% 1.0% 11.1%
New York 62.86% -1.1% -1.2%
Phoenix 24.16% 1.4% 22.8%
Portland 42.13% -0.2% 6.7%
San Diego 63.58% 0.9% 6.7%
San Francisco 46.23% 1.4% 12.7%
Seattle 42.53% 0.5% 7.4%
Tampa 33.77% -0.2% 6.8%
Washington, D.C. 89.11% -0.6% 4.4%
Composite-10 58.28% -0.2% 4.5%
Composite-20 45.82% -0.1% 5.5%
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