NEWS

Case-Shiller ranks Denver No. 3

Date: Jan. 26th, 2010
Contact: John Rebchook Phone: 303-945-6865
The Denver-area housing market ranked No. 3 of the 20 cities tracked in the closely watched S&P/Case-Shiller Home Price Indices report released today.

The Denver metropolitan statistical area was one of four cities that in November showed a year-over-year improvement, “something we really haven’t seen in at least two years in most markets,” said David M. Blitzer, chairman of the Index Committee at Standard & Poor’s.

The Denver housing market showed a 0.5 percent gain in the year ending in November, bested only by Dallas and San Francisco, which showed a 1.4 percent and a 1.0 percent gain, respectively. San Diego also was in positive territory, with a 0.4% improvement.

Overall, the 20 markets in the index showed a loss of 5.3 percent.

In October, Denver was ranked No. 1 by Case-Shiller, with a 0.1 percent loss. (Please visit this link for a blog on October’s results.)

Larry Hotz, a broker with the Kentwood Co., said that the Case-Shiller report reflects homes that went under contract in September and October, and closed in November.

“Back then, we did not know if the Congress and the Obama Administration were going to come out and extend the first-time home buyer tax credit,” Hotz said. “A lot of first-time home buyers were scrambling to get under what could have been the wire.”

Although the $8,000 tax-credit was extended, and a $6,500 tax credit for some current homeowners added, the increased demand put upward pressure on mostly lower-priced homes being sought by people who had been renting or living with their parents.

“It wasn’t uncommon for many homes under $250,000 being bid up,” Hotz said. “I know, because my daughter, who works with me, was taking advantage of the first-time home buyer credit and she had to pay full-price for her home. The lower-end of the market has strengthened, and that obviously is being reflected in the Case-Shiller report.”

But after the tax credit was extended in early November, a sense of urgency among buyers evaporated, and December sales fell sharply more than they do for seasonal reasons, he said.

“We’re still recovering from the holiday blues,” Hotz said.

As the new deadline of April 30 for the tax credits approaches, he said he thinks there will be another surge of people putting homes under contract.

“I think it will be a little less competitive to start looking to buy a home now, than the rush we’re likely going to see as we approach April,” he said.

Charles Roberts, a co-owner of Your Castle Real Estate and a real estate investor, said although it is always nice to have a high-ranking, in another way, he couldn’t care less.

“So we’re not No. 1 and we’re No. 3? So what? What I deal with, and what I care about, is what is going on in my backyard,” he said. “I don’t care that San Francisco appreciated more than us. They’ve been down 50 percent over the past three years, so they should be coming back.”

He said what he cares about is starting to see appreciation in his home and real estate investments, “and I believe that is how the normal person looks at it.”

Roberts, who also is a registered appraiser and a mortgage broker, noted that averages are also misleading, as no individual home is up exactly 0.5 percent.

“We don’t own options on the entire Denver market; we own individual homes,” he said.

And what has happened to individual homes are all across the map, he notes.

“We’re certainly past the downturn for properties under $300,000,” Roberts said. “There is no guarantee that will continue, of course. Maybe interest rates will rise, or the government will stop buying mortgage-backed bonds, or we will experience another wave of foreclosures.”

Still, last year, the Barnum neighborhood in Denver was up 29 percent, Arvada is up 1 percent or 2 percent, and the north Aurora area is up 12 to 15 percent, he said.

“But if you are sitting in a high-end home in Parker, you’re down and probably facing a couple of more years of devastation,” Roberts said. “If you have a $700,000 home in Parker, you would kill for a 0.5 percent improvement, just like I would have five years ago with my little (investment) houses in southwest Denver, when they were falling in value by 25 percent a year.”

Michael Clarkson, principal of Home Hunter Realty in Littleton, has some fundamental problems with Case-Shiller, but said its latest report seems on target.

“I’m happy to say that overall I agree with Shiller,” which ranks Denver as one of the top-performing markets in the country, he said.

“What we’re seeing in Denver right now is that a lot of people are buying down,” said Clarkson, who closely follows a variety of economic indicators that impact real estate, including obvious ones such as interest rates, as well as more arcane ones, such as the money supply.

“One thing I am seeing is that a lot of people are buying toward the median price point of the $200,000 range, which is causing a big feeding frenzy in getting homes in that price range,” Clarkson said. He said that is good for the market because it is taking a lot of houses in the under $300,000 range off the market.

But he said there is not “sufficient lending capacity” for the move-up market. “There is a paucity of financing for the self-employed.” He said that needs to be addressed, as it currently is curtailing a huge segment of the market.

Meanwhile, the latest Case-Shiller numbers, overall, show a mixed-bag.

“While we continue to see broad improvement in home prices as measured by the annual rate, the latest data show a far more mixed picture when you look at other details,” Blitzer said. “Only five of the markets saw price increases in November versus October. What is more interesting is that four of the markets – Charlotte, Las Vegas, Seattle and Tampa – posted new low index levels as measured by the past four years. In other words, any gains they might have seen in recent months have been erased and November is now considered their current trough value. On the flip side, there are still some markets that continue to improve month-over-month. Los Angeles, Phoenix, San Diego and San Francisco have seen prices increase for at least six consecutive months. Looking at the annual figures, four markets – Dallas, Denver, San Diego and San Francisco – have finally entered positive territory."

“To add more mixed signals, we are in a seasonally weak period for home prices, so the seasonally-adjusted data are generally more positive, with 14 of the markets and both composites showing improved prices in November. On balance, while these data do show that home prices are far more stable than they were a year ago, there is no clear sign of a sustained, broad-based recovery.”

Metropolitan Area October-November Change One-year change
Atlanta -0.8% -6.2%
Boston -0.5% -0.7%
Charlotte -0.3% -5.5%
Chicago -1.1% -8.5%
Cleveland -0.2% -2.5%
Dallas 0.0% 1.4%
DENVER -0.5% 0.5%
Detroit -0.7% -13.0%
Las Vegas -0.5% -24.5%
Los Angeles 0.8% -3.5%
Miami 0.0% -12.1%
Minneapolis -0.5% -6.8%
New York -1.0% -7.1%
Phoenix 1.1% -14.2%
Portland 0.3% -7.5%
San Diego 0.4% 0.4%
San Francisco 0.6% 1.0%
Seattle -0.5% -10.6%
Tampa -0.4% -13.2%
Washington, D.C. -0.5% -0.6%
Composite-10 -0.2% -4.5%
Composite-20 -0.2% -5.3%


Sources: Standard & Poor’s, Fiserv