Denver No. 8 in Case Shiller


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The Denver metropolitan area ranked No. 8 of the 20 areas tracked by the closely watched S&P/Case-Shiller Home Price Indices released today. Overall, homes in Denver appreciated by 3.6 percent in the one-year period ending in May, compared with a 5.4 percent gain for homes in the 10-Composite list and 4.6 percent for all 20 of the areas, according to the report.

“I like what I see,” said Peter Niederman, chief executive officer of Kentwood Real Estate.

Niederman noted that some of the California markets shot the lights out in May, according to the index. For example, San Francisco showed a gain of 18.3 percent and San Diego home prices rose by 12.4 percent.

California skews stats

“Those California markets were well into the double digits,” Niederman said. “If you remove those, Denver was right up there. I think Denver is a very sustainable market. Those California markets are really a lot of noise.

They’re very volatile. They have big drops, followed by big gains. Denver does not have these violent swings up or down.”

Niederman, and others, however, cautioned that the May numbers still reflect the impact of the tax-credit buying that took place prior to April 30, so the market should brace for a drop.

Still, sellers are increasingly willing to bargain on prices, especially at the higher-end, and mortgage rates are at historical low, providing an ideal buying opportunity for those financially able to take advantage of what is a buyer’s market, except at the lower-end.

Jobs key to housing

“Only the third-leg of the stool is missing,” Niederman said. “We need to see strengthening in our employment. When we see some improvement in the employment numbers that will bring consumer confidence back. No one buys a home when they lack  confidence.’

On the other hand, he said that consumers could miss the buying opportunity of a lifetime if they wait, because as the economy improves, it is likely that both home prices and interest rates will rise.

“I do understand there are a lot of people out there who realize this is a great buying opportunity, but aren’t willing, or can’t take advantage of it, because of their job situations,” Niederman said. “Or maybe they lost money in the financial markets, and they can’t make a decision to buy now, even though they know it is a great time to be buying. I remain cautiously optimistic about the market.”

Independent broker Gary Bauer also was encouraged by the Case-Shiller report.

“Once again, I think it shows that Denver is a market on to itself,” Bauer said. “This is another example of how relatively strong the Denver market is. I think it is a positive.”

Bauer, however, cautioned that the May numbers still reflect closing activity from the home buying tax credits, which required buyers to place a home under contract by April 30 and close by September 30.

Frenzy gone

“We’re still seeing the frenzy of the tax credits in the May numbers,” Bauer said. “I think the June numbers are likely to be flat.”

Greg Geller, principal of Denver-based Vision Acquisitions, agreed that tax-credit buying drove a lot of the activity in May, and that has to be taken into consideration. Next month, Geller is likely to be named as the president of the Denver Board of Realtors for 2011-2012.

“The tax credits just brought first-time home buyers out in drove,” Geller said. “Without the tax credits, the market might be far worse and not as bloated, and I’m saying that for across the country. Not only did the tax credits bring out more first-time buyers, but it also likely led to more sellers testing the waters. “If you were planning to sell your home next year, you might very well have tried to sell it during the time of the tax credits,” Geller said.

Falling off the earth

John Sullivan, co-owner of RE/MAX of Cherry Creek, said that “while I can believe” the Case-Shiller report was a pretty good indicator of what happened in May in the Denver area, he said he expects the downturn to be quite severe later this year.

“I think the housing market is going to fall off the face of the earth in July or August,” Sullivan said. “I have six or seven listings right now and nobody is making any offers. And some of them are considerably cheaper than they were of the pre-expiration date,” of April 30 for the tax credit deadline.

He even told his son not to rush out and buy a home before the tax credits expired, as he expected that prices would fall when the tax-credits expired.

Not only have home prices softened in many cases, but interest rates fell from an already low level. While that may help existing homeowners that can qualify to refinance, it seems to be doing little to get jump-start the home buying market, he said.

Low interest rate not enough

“I think if they would drop the rate to 3.5 percent it would not make that much difference,” Sullivan said. “Well, a 3.5 percent rate would drive some people to buy a house, but not that many. If 4.5 percent rates aren’t doing it, I don’t know that a lower rate would make that much of a difference. If you don’t have a job, or you are not secure about your job, you’re not going to buy a home no matter how low interest rates are.”

He said that buyers are pickier than they have ever been.

“Everyone wants the good stuff,” Sullivan said. ‘They want the granite and the stainless steel, the location and the ‘Wow’ factor. The prices of the homes that have all of these things, have held up reasonably well. But if you have an average or below-average home, the price might have dropped 10 percent since May 1,” since the tax credits have expired.

The May numbers also broke the streak of consecutive month-to-month improvements in appreciation. November 2009 through April, the appreciation rate had increased from the previous month, topping out at 4.4 percent in April. The market also increased by 3.6 percent in February, from February 2009. Case Shiller uses “paired sales” of homes closing, in an effort to remove the bias of bigger homes closing, thus driving up the overall percentage increases.

National market bouncing along the bottom

Nationally, the overall market, for the most part, appears to have bottomed more than a year ago, but could continue to bounce along the bottom for quite some time.

“While May’s report on its own looks somewhat positive, a broader look at home price levels over the past year still do not indicate that the housing market is in any form of sustained recovery,” says David

M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “Since reaching its recent trough in April 2009, the housing market has really only stabilized at this lower level. The two Composites have

improved between 5 and 6% since then, but this is no better than the improvement they had registered as of October 2009. The last seven months have basically been flat…It still looks possible that the housing

market might bounce along the bottom for the foreseeable future, before showing any real improvement that will filter through to the rest of the economy.”

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John Rebchook

John Rebchook has more than 30 years of experience in writing and communications. As the Real Estate Editor for the Rocky Mountain News, he wrote about residential and commercial real estate for 26 years. He has won numerous awards for business stories and columns that he wrote, both as an individual and part of teams. In addition to real estate, he also covered economic development, banking and financing, the airlines, and cable TV for the Rocky. In addition, he was one of the original freelance writers for, covering commercial real estate for the Internet publication.

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