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Case Shiller: Denver home prices up 9.8%

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Highlights:

  • Case-Shiller releases March report.
  • Denver ranks No. 13, YOY.
  • 9.8% gain first MOM drop since fall of 2011

 Home prices in the Denver area in March rose by 9.8 percent from March 2012, according to the closely followed Case Shiller index released today.

The gain was slightly below the 9.9 percent year-over-year increase in February and broke a 16-month streak of a month-over-month percentage gains.

Denver ranked 13 out of the 20 metropolitan statistical areas tracked in the S&P/Case Shiller Home Price Indices.

Denver’s gain, which has worried some Realtors that prices were rising too fast, trailed the 10.9 percent overall year-over-year increase for the 20 cities.

“I have had some discussions with other real estate agents and the general public of concerns we are heading for another bubble,” said Jason Peck, a broker with Keller Williams Realty Downtown Denver.

“All of this has come in the last 30 days from a lot of people,” he said.

Some neighborhoods, such as West Highland and Highland, are starting to cool off, because sellers are asking too much money, he said.

“Homes are ridiculously expensive in those neighborhoods,” Peck said.

He said he knows of one home that has been sitting on the market for more than 30 days, while a nearby home went under contract in 11 days.

The seller just got too greedy,” in the first example, he said.

He wasn’t concerned about the slight drop from in the Case Shiller report from February, which was almost the equivalent of a rounding error.

“I’ve been kind of expecting this,” Peck said. “I’ve been wondering if the price increases are sustainable.”

However, For some homeowners, who bought at the peak of the market or borrowed too much agains their homes, prices haven’t risen enough, he said.

“There are still people out there who do not have enough equity to sell their home and purchase their next property,” Peck said.

“A lot of homeowners are holding off selling,” he said. “They are waiting for prices to increase even more.”

Statistics, he said, have shown that seven out of 10 consumers still must sell their existing home before they can buy another one.
 One problem for sellers is that even if they sell their home for a high price, if they buy into the same market, they also will pay a great deal for their next home, he said.

“Also, because our inventory is so low, people worry about finding their next property,” he said.

“I’m advising a lot of sellers to rent for six months after they sell, so they aren’t pressured into buying a house today and maybe overpaying,” Peck said.

That is what the smart sellers are doing,” he said, but a number of people don’t want the hassle of a “double-move.”

Peck said that there are still plenty of homes coming on to the market, but homes that are priced right sell quickly.

“We are seeing some buyers getting frustrated,” by being outbid for homes, he said.

Homes price right, do sell quickly, he said, although he noted that mortgage rates have been creeping up lately.

“Obviously, the market is moving at a pretty good pace,” he said.

“Actually, quite a few homes are coming on the market, but it is just the sales volume is up even more,” Peck said. “We definitely need more inventory.”

Peter Niederman, CEO of Kentwood Real Estate, said the March report represents “great numbers,” for Denver. The slight drop from February is inconsequential, he said.

It doesn’t bother him at all that other markets outperformed Denver.

“Denver was one of the first markets to experience the downturn and was one of the first to recover,” he said. “Denver was also the first market to see the downturn in inventory.

“What Case Shiller is showing is the breadth and depth of the recovery nationwide and I am very happy about that.”

On CNBC this morning, housing experts discussing the Case-Shiller report, said across the country one out of four homeowners still have negative equity, that is, their mortgage is worth more than their home.

Many of them are in that situation because they took out home equity lines of credit.

I think people have learned from that and no longer use their homes as ATM machines,” Niederman said.

The experts said that negative equity is the major reason for a lack of inventory in cities across the country.

Another year of appreciation and many more homes will hit the market in Denver and across the country, he said.

“Rising prices are a double-edged sword,” Niederman said.

“On one hand, it is good that people can finally sell their homes, on the other hand it is not good for housing affordability. Rising prices are good in the short-term, but not sustainable long-term.”

Still, overall, the market is behaving just the way it should be behaving, he said.

This market is starting to make sense,” Niederman said.

Independent broker Gary Bauer said he didn’t expect Denver to be ranked in the top half of the 20 cities tracked by Case Shiller.

“Other markets that were so adversely impacted are really coming back in a big way, so I knew they were going to show percentage increases higher than in Denver,” Bauer said.

Still, 2013 is shaping up as a year for the record books in Denver, he said.

“All indications are that 2013 is shaping up to be the best year in history that I am aware of,” Bauer said.

Dave Pike, a broker with Coldwell Banker and president of the Denver Metro Association of Realtors, said the Case Shiller numbers “pretty much reflect what is happening out here.”

He said that the luxury market is starting to see the “frenzy right now,” while in the early years of recovery the activity was mostly for homes priced below $200,000.

“It is good to see activity across a pretty broad spectrum,” he said.

Pike isn’t worried about a bubble in the Denver market.

I’m still fighting with appraisers,” Pike said. “I don’t think appraisers are going to let that happen.”

Also, investors and owner-occupants can still buy almost all homes below replacement cost, he said.

“I would start to worry if the price per square foot sales price was more than the cost of building, but it is not,” he said.

For example, he is selling condos to investors in Lakewood for $125,000, which not too long ago could have been purchased for $110,000.

“But six years ago, the same condo sold for $155,000,” he said. “While the recent appreciation has been very strong, they are still bargains compared with what they sold for at the top of the market.”

Nationally, the market is on a roll.

“Home prices continued to climb,” said David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “Home prices in all 20 cities posted annual gains for the third month in a row. Twelve of the 20 saw prices rise at double-digit annual growth.

The National Index and the 10- and 20-City Composites posted their highest annual returns since 2006.

Phoenix again had the largest annual increase at 22.5 percent followed by San Francisco with 22.2 percent and Las Vegas with 20.6 percent. Miami and Tampa, the eastern end of the Sunbelt, were softer with annual gains of 10.7 percent and 11.8 percent. The weakest annual price gains were seen in New York (+2.6 percent), Cleveland (+4.8 percent) and Boston (+6.7 percent); even these numbers are quite substantial.

“Other housing market data reported in recent weeks confirm these strong trends: housing starts and permits, sales of new home and existing homes continue to trend higher.

“At the same time, the larger than usual share of multifamily housing, a large number of homes still in some stage of foreclosure and buying-to-rent by investors suggest that the housing recovery is not complete.”

Metropolitan AreaChange from January 2000March-April Change1-Year Chanrge
Atlanta2.06%3.8%20.8%
Boston59.14%2.2%8.1%
Charlotte19.57%2.0%7.3%
Chicago13.69%2.7%9.3%
Cleveland1.74%1.8%4.8%
Dallas25.05%2.3%7.4%
DENVER38.28%1.8%9.9%
Detroit-18.72%0.0%19.8%
Las Vegas11.06%2.5%22.3%
Los Angeles92.58%3.4%18.8%
Miami59.65%2.4%13.0%
Minneapolis26.81%2.9%14.8%
New York63.05%1.1%3.2%
Phoenix32.47%1.7%21.5%
Portland45.62%2.1%12.9%
San Diego74.08%3.7%14.7%
San Francisco61.42%4.9%23.9%
Seattle49.05%2.7%11.4%
Tampa42.10%1.7%11.3%
Washington, D.C. 94.16%2.4%7.2%
Composite-1065.63%2.6%11.6%
Composite-2052.37%2.5%12.1%

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