- Case-Shiller releases June report.
- Denver ranks No. 12 out of 20 MSAs.
- 1-year home price gain is 7.7%
Denver ranked No. 12 out of the 20 metropolitan statistical areas tracked by the S&P/Case-Shiller Home Price Indices report.
June prices rose at the slowed pace since October 2012, when they were up 6.9 percent. In May, they rose by 8.2 percent on a year-over-year basis.
June, however, marked the fourth consecutive month that prices in the Denver area set a record high. Prices are up almost 4.2 percent from March, according to Case-Shiller, which analyzes same-house sales in order to avoid the price drift of more expensive homes entering the market.
June also marked the 30th consecutive month of prices rising in Denver.
Denver bests 15 cities, month-over-month
On a month-to-month basis, home prices rose 1.2 percent from May, a tie for fifth place with Tampa.
Denver also bested the overall 1 percent gain for the 20 MSAs.
Even though home appreciation in Denver had been lagging many cities in California, as well as in formerly beaten-up cities like Phoenix and Las Vegas, local brokers were hoping that the price appreciation would slow a bit, so as not to become unaffordable for a large number of consumers.
They got their wish in June.
“The market is moderating,” said Lane Hornung, CEO and founder of 8z Real Estate.
In fact, Hornung believes that local housing appreciation will slow even more.
“We’re slowly returning to historical norms of annual appreciation rates of 3 percent to 5 percent,” Hornung said.
It no longer seems in the cards that prices will increase by 10 percent or more in 2014 compared with 2013.
“I have to concede that it no longer looks like a return to double-digit appreciation is possible this year,” Hornung said.
Denver no longer at frenzy levels
One reason is because buyers now have more choices.
“Lack of inventory remains a challenge so upward pressure on pricing remains, but not at the frenzy level,” Hornung said.
A half-year’s supply of unsold homes is one that is considered in balance between buyers and sellers.
“We still have quite a way to go to before we see inventory levels of six months, but for the first time this year, the trend of ever decreasing supply actually reversed in July as new listings outpaced sales activity,” Hornung noted.”
Fundamentals will increasingly drive the market, he said.
“Long term, the Front Range economy is looking strong, and ultimately will be the driver of our housing market, even as the stimulus of low-interest rates potentially goes away next year,” Hornung said.
“Wouldn’t that be nice?”
“A stable and strong, but not crazy, housing market based on the fundamentals of job growth, income growth, household formation and in-migration to the state,” Hornung said.
While the 7.7 percent gain may seem to some like the Denver housing market is moving in the wrong direction, Peter Niederman, CEO of Kentwood Real Estate, said it is important to put it into perspective.
“It’s all relative,” Niederman said. “Most years, we would be thrilled with a 7.7 percent increase.”
In fact, he would be happy to see the Denver market to cool off a bit more.
“As I have said many times, if we see a steady, stabilized market more in the range of 4 percent to 6 percent appreciation, that would be OK,” Niederman said.
Gary Bauer, an independent broker, said the Case-Shiller report reflects the trend he is seeing and hearing from other Realtors in the Denver-area market.
“Even though it is for the month of June, it is showing exactly what is happening in the marketplace today,” Bauer said.
“Basically, we are not seeing the frenzy we saw earlier this year,” he said. “It has slowed don a bit, but overall, the market is still extremely strong.”
Price appreciation slowdown welcomed
He welcomed a slowdown in appreciation.
“Home affordability is a very big issue,” Bauer said. “We want to see reasonable appreciation and that is what we have.”
The fall market, he predicted, “will be more robust than usual,” although there will be a seasonal slowdown.
Christie Martin, with Metro Brokers, has noticed a pick up in activity in the past week or two, after a lull.
“We definitely saw a decrease in activity,” Martin said. “It seemed like school started earlier this year and with kids going back to school and vacations over,” consumers have focused on buying homes, she said.
“Over the weekend, I just had a crazy number of showings,” on four listings, she said.
She had two showings for a home listed at $955,000 in Arvada, after no activity on it for the past 30 days.
Martin also had a number of showings and received two offers for homes in Denver priced from $205,000 to $260,000.
“I think this fall we are going to stay consistent,” she said. “There is definitely more inventory out there. It’s not going to crazy like it was in the spring and early summer. But I think that is going to stay steady.”
Demand still outstrips supply
David Simonson, of RE/MAX Professionals, said he has been seeing a steady price increase on a month-over-month basis.
”Inventory is still low enough that we are still seeing demand outstrip the supply,” although it is not as pronounced as it was earlier in the year, he said.
“I’m still finding that when I put a home on the market, I have offers by the time I get to the office,” Simonson said.
“And it’s not just for homes in the $200,000s to $250,000s, but all the way into the $400,000s,” he said.
Buyers, however, are becoming more choosy.
“Buyers are paying a premium and they are not willing to accept a home that is not in tip-top shape and shows well,” Simonson said.
“If they present well, homes are still moving,” he said.
He agrees with Bauer that this fall will likely be more robust than usual, but there is one wildcard: the weather.
“I think it was about eight years ago, when almost weekend it snowed from Halloween all the way to mid-February,” Simonson said.
“That caused a definite dip in sales,” he said.
“I think we are going to have a better than average fall, unless we get an early and harsh winter,” Simonson said.
Nationally, “Home price gains continue to ease as they have since last fall,” said David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices.
“For the first time since February 2008, all cities showed lower annual rates than the previous month,” Blitzer said.
Other housing indicators – starts, existing home sales and builders’ sentiment – are positive. Taken together, these point to a more normal housing sector.
“While all 20 cities saw higher home prices over the last 12 months, all experienced slower gains,” Blitzer continued.
“In San Francisco, the pace of price increases halved since late last summer. The Sun Belt cities – Las Vegas, Phoenix, Miami and Tampa – all remain a third or more below their peak prices set almost a decade ago.”
Mortgage rates also are likely to increase, he said.
“Bargain basement mortgage rates won’t continue forever; recent improvements in the labor markets and comments from Fed chair Janet Yellen and others hint that interest rates could rise as soon as the first quarter of 2015,” Blitzer said.
“Rising mortgage rates won’t send housing into a tailspin, but will further dampen price gains.”
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