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Case-Shiller: Denver prices up 9.0%

Highlights:

  • Case-Shiller releases December report.
  • Nation, shows best year since 2005.
  • Local experts happy with Denver’s YOY gain.
Case-Shiller Snapshot.

Case-Shiller Snapshot.

Denver housing prices rose 9 percent in December from December 2012, according to the closely watched Case-Shiller index released today.

Denver was one of only three cities to show an improvement from November, according to the S&P/Case-Shiller Home Price Indices that tracks the same sales of single-family homes in 20 major metropolitan areas.

Overall, 2013 was the best year since 2005, before the Great Recession began.

Denver ranked 16th of the 20 cities. Home prices rose slower than the 13.6 percent and 13.4 percent year-over-year increases for the Composite-10 and Composite-20 indexes, respectively.

Digging deeper into the data, Lane Hornung, founder and CEO of 8z Real Estate, found some that momentum continues in the Denver-area market.

“The non-adjusted index dropped slightly in December, ticking down 0.1 percent but the seasonally adjusted index was actually up quite a bit, posting a 0.8 percent gain month over month,” Hornung said.

“As long as inventory remains this tight, prices will continue to rise, “ he said.

Hornung noted all markets are local and Denver is no exception.

“Affordability has become the latest mantra of the national real estate prognosticators and their parrots in the press, but they’re missing what’s really driving our local markets.” Horning said.

“It’s not affordability, it’s a lack of inventory,” he continued.

“There are plenty of buyers out there who can afford to buy and want to buy, they just can’t find a house to buy,” he said.

“Affordability, although it has predictably eroded last year as both prices and interest rates rose, is still high by historical standards and is not the No. 1 challenge in our market,” Hornung noted.

“Inventory shortages are what is holding back this market and resulting in declining sales volumes,” he said.

“Of course, tight supply is having the opposite effect on prices. Look for the Case Shiller data for February to reflect that upward pressure on prices when it gets released in April.”

Peter Niederman, CEO of Kentwood Real Estate, said it is “staggering” that Denver could show a 9 percent price increase and only four markets did worse.

However, Niederman said he would not trade Denver for a roller-coaster market.

“I like where Denver is,” Niederman said. “Denver did not see the peaks and troughs, or the peaks and valleys, of some other markets.”

Looking forward, Niederman said, “I think we are going to have a good to moderate housing market in 2014,” in the Denver area.

He agreed with Hornung that the biggest issue facing the market today is the low inventory.

Niederman not only does not envy the markets that are appreciating faster than Denver, but he would be happy if price appreciation slowed.

“If we got back to 4 percent to 6 percent appreciation, that would be OK,” he said. “While it was good in the short-run to have double-digit or close to double-digit appreciation in the long-run, I would be happy with more moderate price appreciation.”

Independent broker Gary Bauer noted that even though Denver is near the bottom of the Case-Shiller index, last year was one for the record books.

“With more than $16 billion in closed transactions in 2013 and more than 54,000 closings, it was a record year,” Bauer said.

“Even thought Denver is not a leader in the Case-Shiller report, Denver had a very positive showing,” he said.

That is not the case in a market like San Francisco, which experienced a 22.6 percent year-over-year gain, he said.

“I was just reading an article over the weekend of about San Francisco-ites are going south, because home affordability is so low,” he said.

“They are trading a lifestyle choice, because they can’t afford to buy a home there,” he said.

The demand for housing in Denver remains strong, he said.

“Economist Patty Silverstein just released a report that shows consumer confidence has about doubled,” Bauer said.

“When consumer confidence rises, people make big-ticket purchases like homes,” he said.

Bauer couldn’t agree more with Hornung and Niederman is that more than anything, the Denver-area housing market needs more inventory.

“On a personal note, my longtime neighbor has put his house on the market,” Bauer said. “When I look out my window, I see a line of people looking at the home with their Realtors. It’s a steady stream of people.”

Nationally, the housing market had its best performance in eight years, but gains have moderated.

“The S&P/Case-Shiller Home Price Index ended its best year since 2005,” said David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices.

“However, gains are slowing from month-to-month and the strongest part of the recovery in home values may be over,” Blitzer said.

“The six cities with the highest year-over-year figures saw their rates decline (Las Vegas, San Francisco, Los Angeles, Atlanta, San Diego and Detroit) and most cities ranked at the bottom improved (Denver, Washington and New York) – Charlotte and Cleveland were the two exceptions.” he said.

Also, year-over-year values for the two monthly Composites weakened and the quarterly National Index barely improved, he said.

“The seasonally adjusted data also exhibit some softness and loss of momentum,” he said.

“Recent economic reports suggest a bleaker picture for housing. Existing home sales fell 5.1% percent in January from December to the slowest pace in over a year. Permits for new residential construction and housing starts were both down and below expectations. Some of the weakness reflects the cold weather in much of the country. However, higher home prices and mortgage rates are taking a toll on affordability. Mortgage default rates, as shown by the S&P/Experian Consumer Credit Default Index, are back to their pre-crisis levels but bank lending standards remain strict,” Blitzer said.

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 AreaChange from January 2000November-December1-Year Change
Atlanta13.35%0.0%18.1%
Boston68.85%-0.1%9.6%
Charlotte24.07%-0.1%7.8%
Chicago25.29%-0.5%11.3%
Cleveland5.24%-1.2%4.5%
Dallas32.8%0.2%10.2%
DENVER46.26%-0.1%9.0%
Detroit-5.37%0.0%16.6%
Las Vegas28.5350.4%25.5%
Los Angeles114.84%0.920.3%
Miami77.57%-0.716.5%
Minneapolis38.14%-0.39.7%
New York72.18%-0.36.3%
Phoenix44.48%-0.315.3%
Portland59.84%-0.113.1%
San Diego93.87%-0.118.0%
San Francisco80.56%0.222.6%
Seattle59.32%-0.512.4%
Tampa55.23%0.315.8%
Washington, D.C.104.06%0.28.1%
Composite 1080.13%0.0%13.6%
Composite 2065.69%-0.1%13.4%

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