Case-Shiller: Denver homes rise 8.5%

Highlights: 

• Case-Shiller shows Denver home prices up 8.5%
  
• That is the biggest percentage gain since October 2001.
• Inventory shortage remains the biggest concern for Realtors.

This 1,858-square-foot in home sold for $300,000, close to the average price in the metro area.

The Denver-area housing market showed a 8.5 percent year-over-year gain last December, according to the closely watched Case-Shiller index released today.

That was the biggest year-over-year percentage gain in more than 11 years. The last time it was higher was in October 2001, when home prices rose by 8.9 percent.

Overall, the percentage gain was good enough for 10th place of the 20 major metropolitan statistical areas tracked in the S&P/Case-Shiller Home Price Indices. The overall annual percentage gain in December for the 20 MSAs was 6.8 percent.

In December 2011, Denver ranked No. 2, with a 0.4 percent loss, a sign of how much the nation’s market has recovered. In December of last year, New York was the only city to show a loss, dropping by 0.5 percent. Phoenix led the pack, rising by 23 percent.

On a month-to-month basis, Denver fell by 0.3 percent, on a non-seasonally adjusted basis.

“The non-seasonally adjusted index dropped slightly from November to December, but the seasonally adjusted index was up a strong 0.8 percent,” said Lane Hornung, CEO and co-founder of 8z Real Estate. “With annual appreciation jumping to 8.5 percent, I will repeat my prediction from last month that the Denver MSA will post a double-digit appreciation number some time this spring.”

However, the Denver-area market needs more homes to sell, he and other brokers say. With fewer than 7,100 unsold resale homes on the market in January, the inventory of available homes is believed to be at the lowest level since the 1970s.

“The market desperately needs inventory,” Hornung said.

“To avoid entering a bubble market (and we all know how that turns out), perhaps we need to broadcast the following public service announcement: “Calling all sellers, calling all sellers-now is a good time to sell!”

Peter Niederman, CEO of Kentwood Real Estate, said he is glad that Denver’s housing market is not showing the big gains of places such as Phoenix, although he is glad that the national housing market is recovering.

“I think the best commentary is not that Denver is in the middle of the pack, but all markets are starting to rise,” Niederman said. “I like where Denver is. It is right where it should be. Denver is performing wonderfully.”

It was not that long ago, he noted,  that “we were talking about Denver bucking the national trend. Now, we are seeing this breadth of improvement across all markets. That is very healthy for the overall housing economy and the U.S. economy. It’s like that old saying — a rising tide lifts all boats.”

He said if Denver homes showed the kind of appreciation that the Phoenix market is enjoying, he would be worried.

“I would be very cautious if Denver was in the top five markets right now,” Niederman said. If prices went go up too fast, too soon, it makes the market unaffordable. Companies looking to locate here or grow here, would have second thoughts if homes were too expensive. It also would price many people out of the market.”

The average price of a single-family home sold and closed in January was slightly more than $300,000.

On national news reports, Niederman noted that economist Robert Shiller, co-creator of Case-Shiller, said that a shortage of homes has become a concern in many markets across the country, Niederman said.

“Shiller said new home builders are helping to fill the gap, but they aren’t building homes fast enough,” Niederman said.

“In Denver, builders are definitely help fill the void,” Niederman said. “It’s a tale of two stories. On one level, new homes are competition for homes we are trying to sell. On the other hand, they are creating new supply. A big concern is that people will sell their homes quickly and won’t be able to find another one. In many cases, they can move into a new home, after selling their existing home.”

Builders also are constructing homes that consumers want, he said.

“They build to meet the demand,” Niederman said. “It’s not the super-luxury home builders that are doing the best, but the builders who are constructing homes that are priced at a level where the demand exists. New homes are a good option for someone selling their existing home.”

Independent broker Gary Bauer said the Case-Shiller report shows that Denver is in a very good place relative to other national markets.

“Once again, Denver did not experience the very high peaks nor did it experience the very low valleys like many of these other markets, which are now showing bigger percentage gains than Denver,” Bauer said.

“Slow and steady is much better than these huge swings other markets are showing,” he said.

He agreed with other brokers that the inventory is the biggest problem currently facing the Denver market.

“Soon we will have the February numbers (from Metrolist) and it will be interesting to see if we see another decline in the number of houses on the market,” Bauer said.

“All the Realtors I talk to are putting shoe-leather on the street, ringing door bells and talking to homeowners about why now is a great time to be putting your home on the market. Hopefully, their efforts will pay off and we will start to see an increase in the supply to help us meet the demand.”

The national housing market ended last year on a strong said, according to David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices.

“Home prices ended 2012 with solid gains,” Blitzer said “Housing and residential construction led the economy in the 2012 fourth quarter. In December’s report all three headline composites and 19 of the 20 cities gained over their levels of a year ago. Month-over-month, nine cities and both composites posted positive monthly gains. Seasonally adjusted, there were no monthly declines across all 20 cities.

“The National Composite increased 7.3 percent  over the four quarters of 2012. From its low in the first quarter, it surged in the second and third quarter and slipped slightly in the 2012 fourth period. The 10- and 20-City Composites, which bottomed out in March 2012 continued to show both year-over-year and monthly gains in December. These movements, combined with other housing data, suggest that while housing is on the upswing some of the strongest numbers may have already been seen.

“Atlanta and Detroit posted their biggest year-over-year increases of 9.9 percent and 13.6 percent since the start of their indices in January 1991. Dallas, Denver, and Minneapolis recorded their largest annual increases since 2001. Phoenix continued its climb, posting an impressive year-over-year return of 23.0 percent; it posted eight consecutive months of double-digit annual growth.”

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Have a story idea or real estate tip? Contact John Rebchook at  JRCHOOK@gmail.com. InsideRealEstateNews.com is sponsored by Universal Lending, Land Title Guarantee and 8z Real Estate. To read more articles by John Rebchook, subscribe to the Colorado Real Estate Journal.

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