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Case-Shiller: Denver's home appreciation best in 10.5 years

This 4,769-square-foot home with 4 bedrooms and 5 baths, recently sold for more than $1 million.

Home prices in the Denver area grew by 5.4 percent on an annual basis in July, the biggest year-over-year percentage gain in more than a decade, according to the closely watched Case-Shiller housing index released today.

The last time that Denver had shown a bigger year-over-year gain was in January 2002, when housing prices rose by 5.7 percent, according to the S&P/Case-Shiller Home Price Indices.

The percentage gain ranked Denver No. 4 of the 20 metropolitan statistical areas tracked in the index. Phoenix was No. 1, gaining 16.6 percent, followed by Minneapolis at 6.4 percent and Detroit at 6.2 percent.

Denver out-performed markets such as Washington, D.C., San Francisco, Chicago, Seattle and Dallas on a year-over-year basis

Overall, the 20 composite index showed a 1.2 percent gain on an annual basis.

“Watch out, Denver is on the rise,” said independent Realtor Gary Bauer. “Watch us, because we are going to continue to show nice gains. This is just another example of the strength of our market. We are not seeing dramatic price increases, but they have been steady. The fact is, we are really the first markets to truly come out of this recession and that is being reflected in the numbers.”

Lane Hornung, president, CEO and co-founder of 8z Real estate and COhomefinder.com, said he was not surprised about Denver’s Case-Shiller reports, which always lags the market by about 60 days.

“The trend of rising home values in the Denver metro is well established,” Hornung said. ‘Even the media has jumped on the bandwagon and realized that home prices bottomed out months ago; in fact years ago, in the case of Denver.”

Denver’s housing future looks bright, he said.

“The more interesting issue is not what lies behind, as captured by the lagging Case-Shiller data, but what lies ahead,” Hornung said. “Based on activity occurring in the field now, I think the fall market of 2012 should be more robust than our typical end-of-year market. Sellers are realizing that this is a great time to sell and not waiting until spring to list, although not nearly enough of them to ease our inventory shortage. Buyers are remaining committed and active in the market.”

Peter Niederman, CEO of Kentwood Real Estate, said that while the Case-Shiller report is great news and encouraging, he said he won’t be disappointed if Denver slips in the ranking as other metropolitan areas improve.

On a month-to-month basis, Denver was tied for 10th place with Los Angeles, both showing a 1.3 percent gain in July from June. Overall, the 20 markets showed a 1.6 percent gain from June.

Niederman said he wouldn’t be surprised if nine months or a year from now, if Denver will be in the middle of the pack on a year-over-year basis, too.

“What that will tell me that the rest of the country is doing well, too,” Niederman said. “That is important. It’s like the financial market. You don’t want to just have one segment, whether it be durable goods, or technology or health care, doing well. You want to show improvements in as many sectors as possible.

“I won’t be disappointed a year from now if Denver is in the middle of the pack on a yearly basis, like it is on a monthly basis,” Niederman said. “What that would show me is that the real estate recovery has some breadth and depth to it.

In real estate, it is healthy to see increases in geographic areas and in price points, he said.

“I am thrilled that Denver is doing so well on a year-over-year basis,” Niederman continued. “But I don’t want to see just a few markets doing well. We will know we have a true recovery when it is not just a few markets improving.”

Niederman pointed to a number of homebuilders that have shown recent jumps in sales as a sign that the overall housing market is in a recovery mode.

The Case-Shiller numbers reflect the Denver-area market during the summer, when houses were flying off the shelves, said Scott Matthias, a broker with RE/MAX Professionals and the president of the Colorado Association of Realtors.

“We were just so busy,” Matthias said. “If you looked at the market during the same time last year, most of the sales were bank-owned or short sales. During the summer, all the way through August, we were seeing homes selling in the $500,000 to $600,000 and even in the $700,000s.”

However, the market seemed to cool in September more than the usual seasonal drop, he said.

“I don’t think our September numbers are going to be very great,” he said.

He said it is hard to say what impact, if any, the Presidential election is having on the market.

“We clearly can’t have these super-low mortgage rates forever, and some people say they are likely to rise after the election,” Matthias said. “But consumers have heard that so much, I’m not sure they believe it anymore.”

Indeed, the Federal Reserve has indicated it plans to keep interest rates low through late 2014, although some say that may not be possible.

Scott Webber, president of Fuller Sotheby’s International Realty, however, said unless President Obama is defeated, the housing and economic market in Denver and across country, will not recover anytime soon.

The strong Case-Shiller showing was simply a case of “supply and demand at work,” Webber said. “We had a real supply (shortage) issue,” although he said builders are constructing more homes, which will help to balance supply and demand, putting a lid on appreciation.

“Still, this is good news for owners who have seen nothing but declines over the past three of five years. But Case-Shiller is for July, correct? Here is a quote for you: “That was the peak. It does not reflect what is happening today.”

Webber said he believes the Obama Administration is on the wrong path, as far as housing and the economy.

“Despite what politicians in Washington are telling us, businesses are not hiring,” Webber said. “Businesses are not going to go out and invest in growth. There is too much tax uncertainty and too much regulatory uncertainty. The whole economic foundation is so fragile and uncertain right now that to be an employer and an owner of a business is just frightening.

“There is nothing sustainable in housing or the economy right now and interest rates are artificially low. Personally, I voted for Obama in 2008. But we need a change in attitude and leadership. It will be a night and day change,” if Mitt Romney is elected. “If Obama is re-elected, it will just be more of the same.”

Niederman, however, isn’t so sure the presidential election is that crucial to the recovery of housing and the economy.

“It’s hard to say,” Niederman said. “We need to create jobs and it does not matter that much whether it is a Democratic or Republican president.

“What does matter is more jobs, an increase in consumer confidence and a real commitment to shrink the deficit. We just can’t keep taking on debt like this. That is not how it works. But I don’t think it is going to matter that much if Obama or Romney wins, as far as housing. What we need is less rhetoric and more action. Don’t tell us this is what you are going to do to create jobs. Just do it.”

On a national basis, the July Case-Shiller numbers were extremely encouraging.

“Home prices increased again in July,” says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “All 20 cities and both Composites were up on the month for the third time in a row. Even better, 16 of the 20 cities and both Composites rose over the last year. Atlanta remains the weakest city but managed to cut the annual loss to just under 10 percent.

“Digging into the numbers, 15 cities and both Composites had stronger annual returns in July’s report. New York was the only city with a worse 12-month decline in July than June. Dallas and Washington D.C. saw no change in their annual rates. Cleveland and Detroit saw annual rates decelerate in July versus June, although they remain positive for both cities.

“The news on home prices in this report confirm recent good news about housing. Single family housing starts are well ahead of last year’s pace, existing home sales are up, the inventory of homes for sale is down and foreclosure activity is slowing. All in all, we are more optimistic about housing. Upbeat trends continue. For the third time in a row, all 20 cities and both Composites had monthly gains. Stronger housing numbers are a positive factor for other measures including consumer confidence.

“Among the cities, Miami and Phoenix are both well off their bottoms with positive monthly gains since the end of 2011. Many of the markets we follow have seen some decent recovery from their respective lows – San Francisco up 20.4 percent, Detroit up 19.7 percent, Phoenix up 17.0 percent and Minneapolis up 16.5 percent, to name the top few.

“These were some of the markets that were hit the hardest when the housing bubble burst in 2006. The 10-City has increased 7.4 percent and the 20-City 7.8 percent since their recent lows. The positive news in both the monthly and annual rates of change in home prices over the past few months signals a possible recovery in the housing market.”

MSAChange from January 2000October-November (non-seasonly adjusted)1-Year Change from November
Atlanta-3.32%0.1%7.6%
Boston53.74%-0.9%2.3%
Charlotte15.41%-0.3%5.1%
Chicago13.35%-1.3%0.8%
Cleveland0.68%-0.8%1.8%
Dallas20.55%-0.1%5.7%
DENVER34.50%0.4%7.8%
Detroit-19.67%-0.3%11.9%
Las Vegas0.56%0.4%10.0%
Los Angeles75.58%0.4%7.7%
Miami51.13%0.8%9.9%
Minneapolis26.41%1.0%11.1%
New York62.86%-1.1%-1.2%
Phoenix24.16%1.4%22.8%
Portland42.13%-0.2%6.7%
San Diego63.58%0.9%6.7%
San Francisco46.23%1.4%12.7%
Seattle42.53%0.5%7.4%
Tampa33.77%-0.2%6.8%
Washington, D.C.89.11%-0.6%4.4%
Composite-1058.28%-0.2%4.5%
Composite-2045.82%-0.1%5.5%

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