- Case-Shiller releases April report.
- Denver shows 9.9% YOY gain.
- Denver ranks 13th of 20 MSAs.
Denver home values also are closing in on the all-time high prices set during the housing boom in August 2006, according to the S&P/Case-Shiller Home Price Indices.
“While Denver and Dallas experienced modest peaks compared to the bubble cities like Miami and Phoenix, it is Denver and Dallas that are within shouting distance of their all-time highs,” Dave Blitzer, chairman of the Index Committee for the S&P Down Jones Indices, wrote in a report.
Denver home prices in April rose to 138.81 (38.81 percent above the base of 100 set in January 2000), while prices peaked at 140.28 when prices were rallying in August 2006.
Nationwide, April was a record month for the 20 major metropolitan statistical areas in the Case-Shiller index.
Blitzer said that rising mortgage rates may not derail the rising national housing market.
“From 2000 to about 2005, rates fell and home prices rose,” Blitzer said.
“At the top of the bubble — 2006 to 2009 — mortgage rates were volatile but little changed and prices surged and then fell. “Since 2009 mortgage rates are falling while housing prices struggled to recover. Looking at the last 12-1/4 years, no strong cause and effect relation can be seen. While mortgage rates jumped in the last month, there’s more to housing than simply mortgage rates.”
He noted that last week’s comments from the Fed resulted in a sharp increase Treasury yields, sparking fears that “rising mortgage rates will damage the housing rebound. Home buyers have survived rising mortgage rates in the past, often by shifting from fixed rate to adjustable rate loans. In the housing boom, bust and recovery, banks’ credit quality standards were more important than the level of mortgage rates. The most recent Fed Senior Loan Officer Opinion Survey shows that some banks are easing credit restrictions. Given this, the recovery should continue.”
Chris Mygatt, president of Coldwell Banker Residential Brokerage Colorado, said that is good to hear that Blitzer doesn’t believe that rising mortgage rates will shutdown the nationwide housing recovery.
“Everybody has been on pins and needles about rising rates,” Mygatt said.
He, and others, said that Denver, which ranked 13th out of the 20 MSAs in the Case-Shiller report, is in a good place. The last time Denver showed a higher, year-over-year percentage gain was the 10.7 percent increase in August 2001.
“You have cities like Miami and Las Vegas that are having these hyper-explosive increases, after falling so much during the crash, while Denver is showing an extremely robust, but much more sustainable real estate recovery,” Mygatt said.
People who live here take the recovery for granted, but that is not true everywhere in the country, he added.
“There are still some cities in the Midwest, for example, that are not experiencing a recovery,” he said.
He also disagrees with those who contend that the Denver housing market is facing a bubble, because most consumers do not have the income to quality to buy a median-or average-priced home.
“First, if you look at truly major metropolitan markets like New York and San Francisco, I think we have very attractively priced homes,” Mygatt said.
Also, he said there are options for people who are priced out of trendy neighborhoods.
“For example, 10 minutes from Congress Park, there are neighborhoods like RiNo and Five Points that are transforming before our very eyes,” Mygatt said.
“While the median home price in Congress Park might be $425,000, in just 10 minutes you can be in a market where the median price of a home might be $140,000 and arguably is an equally desirable area,” Mygatt said.
“I whole heartedly agree with everything he said,” Niederman said.
Shiller, he said, that because demand is so strong for housing across the U.S., he does not see mortgage rates rising off the bottom” curtailing housing activity.
“In the big scheme of things, this recent increase is just a blip and the housing market continues to have legs,” Niederman said.
In Denver, Niederman said it is important to realize that not every house is the subject of a bidding war.
“I know it is frustrating for buyers,” who are outbid numerous times, but Niederman said that might not only the case in 10 percent to 15 percent of the homes on the market.
“And is there something wrong with a home that does not sell in 24 hours? Absolutely not,” Niederman said.
He said it is important to keep in mind the average days on market for a single-family home sold in May was 48 days.
If a home remains unsold for 30 or 60 days, it may be “mispriced” and provide a “missed opportunity” for buyers, he said.
“The seller might be asking $500,000, but it is truly worth $475,000,” Niederman said.
However, the buyer might be willing to accept $475,000 and is pushing the limits of the asking price hoping someone will pay it, he said.
“When someone is getting a little aggressive on the pricing and buyers aren’t offering less than the asking price, those can be missed opportunities,” Niederman said.
Shiller also said that he thinks flippers are back in the market and fueling some of the growth.
“I don’t know whether that is happening in Denver,” Niederman said.
“But for flippers, it is like that game we played as kids, musical chairs,” he said. “When the music stops, they can get caught if they were overzealous. For a homeowner, with a long-term strategy, the ebbs and flows of the market are not that important.”
He said that he thinks Denver is in the second year of a seven-year upward cycle.
“Does that mean that prices are going to go straight up during the rest of the cycle? Absolutely not. Like I said, every market ebbs and flows. No market ever moves up in a continuous straight line.”
Independent broker Gary Bauer said the Case-Shiller report is good news for Denver and the nation.
“It is good to see the overall market throughout the nation is coming back,” Bauer said.
“I don’t mind that Denver remains near the middle of the pack,” Bauer said.
“We are showing inventory increases and our price appreciation is reasonable and comfortable,” Bauer said. “The Denver market is strong.”
He said he hasn’t hear of rising mortgage rates having much impact on the demand for houses.
“It does have an impact on home affordability,” Bauer said. Rates for a 30-year, fixed-rate mortgage now are hovering around 4.5 percent, compared with about 3.9 percent a month ago.
That means a consumers who could have afforded a $2,000 a month mortgage for a $425,000 home, could now only qualify for a $395,000 home.
Still, Bauer thinks Denver will experience a strong summer selling season.
“Buyer demand is still out there and I don’t see any indication that is going to stop, unless something major hits us,” Bauer said. “I think is going to be a great market.”
That should be true across the country, project Blitzer.
“The recovery is definitely broad-based,” Blitzer said.
“The two composites showed the largest year-over-year gains in seven years,” he continued.
“Atlanta, Las Vegas, Phoenix and San Francisco posted year-over-year gains of over 20 percent in April. San Francisco was the highest at 23.9 percent. Phoenix posted 12 consecutive months of double-digit growth. Recent economic data on home sales and inventories confirm the housing recovery’s strength.”
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.
Metropolitan Area Change from January 2000 March-April Change 1-Year Chanrge
Atlanta 2.06% 3.8% 20.8%
Boston 59.14% 2.2% 8.1%
Charlotte 19.57% 2.0% 7.3%
Chicago 13.69% 2.7% 9.3%
Cleveland 1.74% 1.8% 4.8%
Dallas 25.05% 2.3% 7.4%
DENVER 38.28% 1.8% 9.9%
Detroit -18.72% 0.0% 19.8%
Las Vegas 11.06% 2.5% 22.3%
Los Angeles 92.58% 3.4% 18.8%
Miami 59.65% 2.4% 13.0%
Minneapolis 26.81% 2.9% 14.8%
New York 63.05% 1.1% 3.2%
Phoenix 32.47% 1.7% 21.5%
Portland 45.62% 2.1% 12.9%
San Diego 74.08% 3.7% 14.7%
San Francisco 61.42% 4.9% 23.9%
Seattle 49.05% 2.7% 11.4%
Tampa 42.10% 1.7% 11.3%
Washington, D.C. 94.16% 2.4% 7.2%
Composite-10 65.63% 2.6% 11.6%
Composite-20 52.37% 2.5% 12.1%
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