Case-Shiller: Denver shows strength in October


A closely watched national report released today showed signs of the Denver-area housing market improving in October, bucking a national trend that was so dire that the head of the group that released the Case-Shiller report said it “contained no good news.”Yet, good news abounded for Denver, relative to the other 19 metropolitan statistical areas tracked by the S&P/Case-Shiller Home Price Index.

Indeed, by one metric – seasonally adjusted changes from September to October  – Denver ranked No. 1, with a 0.3 percent gain, compared with an overall drop of 1 percent for the 20 cities tracked by Case-Shiller. Denver and Washington, D.C., were the only cities to be in positive territory in the month-to-month, seasonally adjusted ranking.

Crown jewel

“I think you have come across the crown jewel of the Denver market,” said independent real estate broker Gary Bauer, who releases his own report based on Metrolist data. “I think that is something many people will not know. Even though our transactions are down in the latter half of the year, prices have held their own and in some cases are up a bit. The affordability for first-time home buyers is still way up there. Pricing overall, remains stable, with a slight amount of appreciation.”

In the 12-month period ending in October, Denver ranked seventh overall, showing a 1.8 percent decline, compared with a 0.8% decline for all 20 cities. That was the best ranking for Denver since it was ranked seventh in March. In September, it was ranked ninth. And while the 1.8 percent decline was the second largest percentage drop this year, it marked a 42 percent improvement from the 3.1 percent year-over-year drop in September.

Much of the reason that Denver’s relative position improved is because other cities declined more than Denver. Still, many Realtors are encouraged by Denver’s improvements.

Tax credit “training wheels” off

“What this says to me is that the market is showing continued stabilization, post-tax credits,” which required qualified home buyers to place homes under contract by April 30, said Lane Hornung, president of 8z Real Estate, a sponsor of InsideRealEstateNews. “We’re seeing how the market is performing with what I call the tax-credit “training wheels” off. One by one, the tax incentives to buy a home are going to be going away, with the big one being the tax credits. It is encouraging to see the market is continuing to stabilize without the tax credits. Another way to put is that we continue to bounce along the bottom., with a 2 percent or 3 percent plus or minus change, which ultimately will smooth out over time.” The credits provided up to $8,000 for first-time home buyers and $6,500 for qualified current owners.

Denver’s ranking as the No. 1 city on a seasonally adjusted basis in October to November is not a surprise to Hornung. “That re-affirms or corroborates that we have been seeing this counter-cyclical seasonal activity this winter,” Hornung said. “This market is performing at a higher level of activity this winter than is usual.”

Hornung said while it is tough to pinpoint why, he said that there is starting to be a resurgence in the number of people re-locating to the Denver area. “Colorado remains an attractive place to live,” Hornung said. “And Colorado does not have the volatility of many other markets, so it as not as scary to jump into.  Colorado’s unemployment is below the national average, although we still do not have enough job growth.” Also, some buyers may be signing on the dotted line because they fear that if they do not buy now, they will face higher interest rates next year.

Chris Mygatt, president of Coldwell Banker Colorado, said that overall, the Case-Shiller reports shows a relatively flat, stable market for Denver. “That is a good thing,” Mygatt said. “I am disappointed to see that the gains we made in the first half of the year did go away with the tax credits. The second half of the year was driven more by the unemployment rate. Still, overall, our housing is still relatively affordable, and I look forward to a stronger 2011.”

Peter Niederman, chairman of the Kentwood Cos., said that Denver’s improvement is “exciting,” but it must be put into perspective. “One month does not a trend make,” Niederman said. “There is too much of what I call “noise” that can impact one month. Maybe a few really big homes closed, which skewed the numbers up slightly.” Niederman said that the value of Case-Shiller is that it shows how Denver compares to other cities.

Independent broker Bauer agreed. “The global view is important,” Bauer said, and it may help convince people in Denver that a long-time home investment in Denver is more stable than in a Phoenix or Las Vegas. “On the other hand, it is very important for people not to lose sight of the fact that all real estate is local, and what happens in your specific neighborhood, whether you are a buyer or a seller, is what ultimately is important.”

2011 better than 2010

Niederman noted that “Denver came out of the gate really strong in the first half of the year, because of the tax credits. The second half, sales fell off. What that means is that in the first half of 2011, we are likely to see a drop in comparison to the same months in 2010, because we won’t have tax credits driving the market. But we will likely make up some ground in the third quarter and fourth quarter of 2011 compared to Q3 and Q4 of 2009. I think overall, 2011 will likely be a bit stronger than 2010.”

Niederman also pointed out that Case-Shiller is not as current as Metrolist data that will be released for December and all of 2010 next week. “Metrolist is more current, while Case-Shiller is old data, because it is telling us where we were 60 days ago.”

National picture bleak

October was the fifth consecutive month where the annual growth rates moderated from their prior month’s pace, confirming a clear deceleration in home price returns. The 10-City Composite posted a +0.2% annual growth rate in October, versus the +5.4% reported five months prior in May, and the 20-City Composite has now re-entered negative territory, down 0.8% in October versus its +4.6% May gain.

“The double-dip is almost here, as six cities set new lows for the period since the 2006 peaks. There is no good news in October’s report. Home prices across the country continue to fall,” said David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “The trends we have seen over the past few months have not changed. The tax incentives are over and the national economy remained lackluster in October, the month covered by these data. Existing homes sales and housing starts have been reported for both October and November, and neither is giving any sense of optimism. On a year-over-year basis, sales are down more than 25 percent and the months’ supply of unsold homes is about 50 percent above where it was during the same months of last year. Housing starts are still hovering near 30-year lows. While delinquency rates might have seen some recent improvement, it is only on a relative basis. They are still well above their historic averages, in both the prime and sub-prime markets.

“Looking at the monthly statistics, all 20 MSAs and both composites were down in October over September,” he continued. “While not always consecutive months, 12 of the MSAs and both composites have posted at least six months of decline since the beginning of 2010. In addition 15 MSAs and both composites have posted three consecutive months of decline with October’s report; a further sign that the few months of positive print earlier this spring were only a temporary boost. The seasonally adjusted data tell largely the same story.”

And as good as the news was for Denver in October, there is no guarantee that is the start of a trend, Bauer said.

“I would like to say it is a trend, but I’m not quite sure we will continue to see us perform so well relative to other markets,” Bauer said. “I do not think we will fall back, but I’m not sure we’re going to see any big upward movement, either.”

AreaAppreciation since 2000September to October change1-year change from October
Las Vegas04.7%-0.1%-15.1%
Los Angeles68.43%0.3%-6.3%
New York75.01%-0.0%-7.7%
San Diego55.37%0.4%-2.4%
San Francisco35.81%1.3%-2.6%
Washington, D.C.79.71-0.4%-2.8%

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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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