Watch a video of David Blitzer at the end of this article.
- Denver’s 7.8% gain best since October 2001.
- Denver’s housing market is closer to the top than the trough.
- Shortage of homes looms as a large problem.
The Denver-area housing market showed a 7.8 percent year-over-year increase in November, its best performance in more than 11 years, according to the closely followed Case-Shiller index released today.
The last time the Denver housing market showed a bigger percentage gain was in October 2001, when home prices rose in value by 8.9 percent, according to the S&P/Case-Shiller Home Price Indices, which tracks 20 major metropolitan statistical areas in the U.S.
The Case-Shiller report tracks the repeat sales of homes, a different methodology than other reports, such as those from Metrolist.
An analysis of the Case-Shiller report also shows that the Denver market in Denver was only 4.1 percent down from when it peaked in August 2006, while it is about 12 percent higher than its trough in February 2009.
Other markets, such as Phoenix and Las Vegas, which are showing double-digit, year-over-year gains, showed much wider swings.
One local expert, however, thinks double-digit appreciation is in the cards.
“With annual appreciation coming in at a strong 7.8 percent for the Denver metro area, the question now becomes: “Is the Denver index going to see double-digit year over year gains in future Case-Shiller reports, and if so, when?”,” said Lane Hornung, CEO and cofounder of 8z Real Estate.
“I am willing to predict that the Denver index will top 10 percent in the coming months, and it could come as soon as soon as next month, but more likely in March or April,” Hornung said
“We have a chronic inventory shortage, and the upward pressure on prices will continue,” Hornung said.
The Denver-area housing market has come a long way, said independent broker Gary Bauer, who is the current chairman of Metrolist, which publishes the Multiple Listing Service, or MLS, said the
“Several years ago, we saw the shock of the recession,” Bauer said. “The Denver housing market was really stunned and for a number of months nothing happened. All of a sudden, the market started to take off, first at the lower end, and eventually at higher price points.”
Today, the market clearly has recovered, he said.
“This latest Case-Shiller report, once again, shows how resilient the Denver market is, although it does not have the huge swings of other markets,” Bauer said.
The strong market that Denver experienced in 2012 appears likely to continue this year, although 2013 will not show the record year-over-year improvement seen last year, he said.
While the 2012 housing market showed a record year-over-year gain, Bauer said in order to move forward in 2013, the market has to “really work on three things:”
- “No. 1, we have to make sure employment increases.
- ‘No. 2, which we are already seeing, consumer confidence needs to increase.
- “And No. 3, we have the difficult prospect of getting more home sellers in the market, because we have such a shortage of inventory. If we can accomplish these things, we will have another great year.”
Overall, Denver ranked No. 8 of the 20 MSAs tracked by Case-Shiller. The last time it ranked lower was in September 2010, when Denver was ninth, with a 3.1 percent year-over-year decline.
Peter Niederman, CEO of Kentwood Real Estate, however, said Denver’s drop in the rankings is good news for the national economy, because it means the national housing market is recovering, and Denver is no longer bucking a national trend.
“These are great numbers for Denver,” Niederman said about todays’s report. “Denver is in a great place right now. But what I noticed on the year-over-year numbers, some of hardest hit markets are now showing huge gains.”
Phoenix, for example, showed a 22.8 percent increase in November, the top performer on the Case-Shiller index. Detroit and Las Vegas were up 11.9 percent and 10 percent, respectively.
Expensive markets such as San Francisco and San Diego also bested Denver, rising 12.7 percent and 8 percent, respectively.
“Denver is showing a nice rebound and some stability,” Niederman said. “Prices are not so high that Denver is unaffordable.”
Niederman also said that home builders in the Denver area are doing a great job of “filling the gap” to meet buyer demand, especially since the inventory of unsold resale homes is about a third lower than it was a year ago.
Chris Mygatt, president of Coldwell Banker Residential in Colorado, said he would prefer to be in a market like Denver, rather than Phoenix or Las Vegas.
“The Case-Shiller numbers for Denver are just great,” Mygatt said. “We are really known for having a stable, sustainable real estate market and the Case-Shiller numbers indicate that. The 7.8 percent increase is very strong, but I don’t think that is something that is sustainable if you are looking over a five or 10-year time period. But when I see markets like Phoenix and Vegas shooting up, after shooting down, I would take Denver’s market any day.”
Investors are fueling much of the demand in the Denver area, said Mark Eibner, of Metro Brokers Realty.
“The thing I am seeing right here, right now is millions and millions of dollars have left the equity market – Wall Street – and have gone into housing. People are tired of this whole mutual fund debacle.”
Eibner said that many consumers are tapping tax-deferred accounts such as 4019(k)s and IRAs to buy homes as investments.
“Other people are using cash,” Eibner said.
There also has been a huge increase in 1031 tax-deferred exchanges, in which investors can buy income-producing properties and defer taxes on the capital gains, he said.
“I’d say at least 40 percent of my business is for investment properties right now,” Eibner said. “Usually, I rarely do investment properties. The last time it was like this was back in the ‘80s, when people could buy HUD and VA foreclosures for pennies on the dollars.”
For owner-occupants, he said the big trend is people want to live close to Denver and not in the country or the suburbs.
“People are wanting to urbanize, and not buy a suburban or rural home,” Eibner said. “People are realizing they don’t need a McMansion. That people are willing to pay $300,000 or $400,000 to live in Highland, but are not paying $300,000 and up in Parker, tells you something.”
Lindy Burk, a Realtor with RE/MAX Alliance, said today’s Case-Shiller numbers reflect what she is seeing.
“I love it,” Burk said. “I truly believe around the country, home values are going up, which is very encouraging.”
In the Denver-area however, prospective buyers increasingly are frustrated that they have so little to choose from, she said.
“Our inventory is so tight right now, where ever you go,” Burk said. “Buyers have slim pickings.”
Recently, she was showing a buyer homes in the Westwood neighborhood.
“She decided she would sleep on it over the weekend and on Sunday it was gone,” Burk said. “I’ve heard there are four buyers for every home on the market. You really have to jump on a home to get it. We are seeing multiple offers and bidding wars all the time.”
Burk said she sees little increase in the inventory.
“I told buyers last year we would see an increase in the spring and then the summer, but it didn’t happen. I thought we would see an increase in January, but it doesn’t seem to be happening.”
Nationally, the housing market has clearly gained a lot of strength, according to David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices.
“The November monthly figures were stronger than October, with 10 cities seeing rising prices versus the month before,” Blitzer said.
“Phoenix and San Francisco were both up 1.4 percent in November followed by Minneapolis up 1.0 percent,” he said. “On the down side, Chicago was again amongst the weakest with a drop of 1.3 percent for November.”
However, seasonality still plays a role on the national numbers, he said.
“Winter is usually a weak period for housing which explains why we now see about half the cities with falling
month-to-month prices compared to 20 out of 20 seeing rising prices last summer,” Blitzer said.
“The better annual price changes also point to seasonal weakness rather than a reversal in the housing market. Further evidence that the weakness is seasonal is seen in the seasonally adjusted figures: only New York saw prices fall on a seasonally adjusted basis while Cleveland was flat.
“Regional patterns are shifting as well. The Southwest – Las Vegas and Phoenix – are staging a strong comeback with the Southeast — Miami and Tampa close behind. The sunbelt, which bore the brunt of the housing collapse, is back in a leadership position. California is also doing well while the northeast and industrial Midwest is lagging somewhat.
“Housing is clearly recovering. Prices are rising as are both new and existing home sales. Existing home sales in November were five million, highest since November 2009. New home sales at 398,000 were the highest since June 2010. These figures confirm that housing is contributing to economic growth.”
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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