The Denver-area housing market in June showed the biggest percentage gain in more than two years, according to the closely followed Case-Shiller index released today.
The Denver-area market gained 4 percent in the year ending in June, the biggest percentage gain since the 4.4 percent jump in April 2010, when the housing market activity was being fueled by the $8,000 tax credit for first-time home buyers.
Overall, Denver ranked fourth for year-over-year appreciation, of the 20 Metropolitan Statistical Areas tracked in the S&P Case-Shiller Home Price Indices.
Phoenix was the only market to show a double-digit gain, jumping by a whopping 13.9 percent. Atlanta showed the biggest decline, falling by 12.1 percent. Overall, the 20 MSA showed an average year-over-year increase of 0.5 percent.
“I’ll take it,” Lane Hornung, president and CEO of 8z Real Estate and COhomefinder.com, said about the 4 percent gain for the Denver-area housing market.
“A 4 percent increase in home values moves thousands of Front Range homeowners from a negative equity position to a positive equity position,” Hornung said.
“Some of these folks will come to the realization that they aren’t locked into staying in their existing home and that now is a good time to be a seller, bringing much-needed lower-priced inventory to the market,” Hornung said.
“That said, I am still surprised at the lack of move-up buyers in the market today,” Hornung continued. “I think many are sitting tight and will just wait until spring, keeping a close eye on the U.S. economy and the situation in Europe in the mean time.”
Consumers should take note of the Case-Shiller report, said Peter Niederman, CEO of Kentwood Real Estate.
“For the buyers in the market, this will validate they are doing the right thing,” Niederman said. “For consumers who are considering doing something, this should open their eyes. The market is looking better and rebounding.”
Independent Realtor Gary Bauer said it is especially important that the market is showing gains close to those when the tax credits were propping up the market.
“That is very significant because what the tax credit days did was steal from next year’s activity,” Bauer said. “To reach those levels without any incentives is a real testament to the market. Case-Shiller’s report shows the strength of the market.”
Still, the market faces some head winds, he said.
“I’m still concerned about the lack of inventory and the overall state of the economy,” Bauer said.
When the nationwide real estate market collapse began several years ago, the recovery was hampered because many prospective buyers decided they would be better off waiting for lower prices. Often, patience was rewarded.
But those hoping prices for most homes will be priced lower next year in the Denver area , probably will be disappointed, said Niederman.
“For those waiting for the absolute bottom, they have waited too long,” Niederman said. “That is gone. We’ve passed the bottom.”
Still, he said the Denver market, partly for seasonal reasons, appears to have cooled off from the feeding frenzy from February through June, when multiple offers for homes became increasingly common. Niederman noted that home showings, a leading indicator of future sales, were down 20 percent to 25 percent in July from June.
Plus, the super-hot weather in July and August probably slowed home-buying activity, he said.
“People don’t like to look at homes in the rain and snow, and I’m sure they don’t like to do it when it is 95 and 100 degrees outside,” Niederman said.
And while luxury home sales have picked up, Niederman said that is not always good news for sellers.
“A person might have paid $3 million for a home in 2005 and 2006, and now they are selling it for $1.9 million,” Niederman said. “Yes, it is a sale, but it is not a good sale for the seller, although it is a good deal for the buyer.”
Chris Mygatt, president of Coldwell Banker Residential in Colorado, said while the supply of all homes on the market is down 41 or 42 percent, the luxury housing market supply is up 8 percent from a year earlier.
“That means that the market for most homes is even tighter than the 41 percent or 42 percent drop would lead you to believe,” Mygatt said. “I think this blip in the inventory for homes above $500,000 is a sign that owners of luxury homes think they need to seize this moment to sell their homes while interest rates are so low.”
Indeed, Inside Mortgage Finance, a trade journal, reports that nationwide lenders made $38 billion in jumbo loans in the second quarter of this year, a 65 percent jump from the same period in 2011. A jumbo loan is typically for a loan of more than $417,000, the conventional-loan cutoff in most markets.
Scott Webber, president and owner of Fuller Sotheby’s International Realty, said what is most significant about Denver’s 4 percent gain is that it is many times larger than the overall 0.5 percent year-over-year increase for all of the metro areas tracked by Case-Shiller.
“Wherever I go in the country, when I tell people I am from Denver and from Colorado, 100 percent of the time they say they wish they lived here. Home prices here are stabilizing and are even starting to rise a little bit. Denver is clearly one of the bright shining starts of the nation’s marketplace.”
On the other hand, he said the market still faces challenges.
A big one is the Presidential election.
“There is still a lot of uncertainty, especially with the political circus gong on right now,” Webber said. “A lot of people don’t want to make a big decision like buying a home until November is behind them,” and either President Barrack Obama is re-elected or is replaced with Mitt Romney, he said.
Nationally, the housing market also showed signs of recovering.
“Home prices gained in the second quarter,” said David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “In this month’s report all three composites and all 20 cities improved both in June and through the entire second quarter of 2012. All 20 cities and both monthly Composites rose for the second consecutive month. It would have been a third consecutive month had we not seen home prices fall in Detroit back in April.
“The National Composite rose by 6.9 percent in the second quarter alone, and is up 1.2 percent from the same quarter of 2011. The 10- and 20-City Composites closely mimic these results; the 10-City was up 5.8 percent over the quarter and the 20-City was up 6.0 percent. The two Composites also entered positive territory on an annual basis, up 0.1 percent and 0.5 percent, respectively.
“Only two cities – Charlotte and Dallas – saw annual rates of change worsen in June. The other 18 cities and both composites saw improvement in this statistic, and 13 of these had a positive trend. There were only six cities – Atlanta, Chicago, Las Vegas, Los Angeles, New York and San Diego – where the annual rates of change were still negative. Boston’s annual rate was flat. We seem to be witnessing exactly what we needed for a sustained recovery; monthly increases coupled with improving annual rates of change. The market may have finally turned around.
“The regions showed positive results for June. All 20 of the cities saw average home prices rise in June over May and all were by at least 1.0%. Detroit was up the most, 6.0 percent, and Charlotte the least, 1.0 percent. The Composites showed the same increases as last month – the 10-City rose by 2.2 percent in June and the 20-City by 2.3 percent. We are aware that we are in the middle of a seasonal buying period, but the combined positive news coming from both monthly and annual rates of change in home prices bode well for the housing market.”
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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