- CoreLogic releases its December report.
- CoreLogic owns Case-Shiller.
- Colorado No. 1, Texas No. 2, according to CoreLogic.
Colorado single-family home prices soared 8.4 percent in December from December 2013, the biggest increase in the U.S., according to a national report released on Tuesday.
The report by CoreLogic, which owns the closely watched Case-Shiller index, also showed that homes in the Denver metro area rose by 9.81 percent.
Only Houston, with an overall gain of 10 percent, topped Denver, as far as a major metropolitan statistical area.
Experts said the strong performance can be attributed to a record-low supply of unsold homes, while demand is as strong, if not stronger than ever.
“What can you say? Colorado, and especially Denver, are hotter than ever,” Webber said.
“We have a lot in-migration, jobs, positive energy,” Webber said.
He said Colorado and Denver are the envy of the nation.
“Wherever I go, and I tell them I am from Colorado, people either tell me they wish they lived here or they are planning to live here,” Webber said.
With apartment rental rates also at record levels, Webber said he expects more renters to become home buyers in 2015.
“If you were qualified to buy a home, with prices continuing to go up and interest rates as low as they are, I can’t imagine why you would continue to rent,” Webber said.
The biggest hurdle for first-time home buyers, however, is the lack of homes on the market, he and others agree.
“A big part of it is they are not building entry-level for-sale multifamily homes,” Webber said.
“We have to resolve the entire construction defect threat, so we will start to see more entry-level condos built,” Webber said.
A number of experts are concerned that near double-digit appreciation will make homes unaffordable.
“We are under increased pressure from our lack of inventory and that is making me nervous,” said Chris Mygatt, president of Coldwell Banker Residential Brokerage in Colorado.
He said he would be more comfortable with prices rising 6 percent to 8 percent, rather than closing in on 10 percent.
“Some people say if prices rise high enough that will convince more people to sell their homes,” increasing the supply, Mygatt said.
“I don’t think I fall into that category,” Mygatt said.
“Unless you are moving out of the area, you still have to buy a home,” that likely will be at a record price, he said.
“The only time that would not be true if you were a significant move-up buyer,” Mygatt said.
“There is so much pressure on homes in the $300,000 to $500,000 range that if you are selling that home and placing it with a home in the $800,000 to $900,000 range, you will do very well,” he said.
He said while more inventory also is needed at the upper-end of the price range, the higher in price, there is not as much demand as in the lower price range.
Renters, of course, don’t have to worry about selling and moving, but they are faced with an almost non-existent inventory.
And that is only getting worse, said Joe Manzanares, of RE/MAX Uptown.
Hedge funds, he said, increasingly are buying entry-level homes in the Denver area, with plans to rent them for at least the near future.
Hedge funds, he said, are especially interested in buying the handful of distressed homes, such as those that are in foreclosure.
At the same time, local investors are eager to buy distressed properties to rent them, he said.
“If you live in Denver, you want to put your money in real estate, not the stock market,” he said.
That makes it even more difficult for the first-time buyer, he said.
“If there is a home in Aurora with two to four bedrooms and a two-car garage, you will find hedge funds and investors bidding up the price,” Manzanares said.
“The owner-occupant just can’t compete,” he said. “I was talking to a guy who works for a title insurance company and he said they are closing 20 to 30 homes a month from hedge funds,” Manzanares said. The CoreLogic report illustrates that. When distressed properties were excluded, Colorado home prices in December rose by 7.8 percent, instead of 8.4 percent for all homes, according to CoreLogic.
The dearth of homes has made it tough on Realtors, he said.
“We have what? Ten thousand or 15,000 agents in the metro area and only about 5,000 listings? Do the math. It’s a tough market, unless you have a listing. Then, you are the prettiest girl at the dance.”
Peter Niederman, CEO of Kentwood Real Estate, is concerned that home prices are rising too fast.
“If home prices keep going up close to 10 percent a year, pretty soon the average price of a home in the Denver area will be $400,000,” Niederman said.
“I would be thrilled if appreciation would fall to the 4 percent to 6 percent range,” he said.
While close to double-digit appreciation was welcome when it helped Denver become one of the first cities in the nation to recover from the housing downturn, “it’s not sustainable in the long run,” he said.
“Our great quality of life and our strong economy, coupled with being able to get a conventional mortgage for a 30-year fixed rate below 4 percent, is really creating this huge demand,” Niederman said.
Meanwhile, the national average appreciation for all single-family homes was 5 percent in December, according to CoreLogic.
Texas was No. 2 after Colorado, showing a 7.8 percent gain.
“For the full year of 2014, home prices increased 7.4 percent, down from an 11.1-percent increase in 2013,” said Sam Khater, deputy chief economist at CoreLogic
“Nationally, home price growth moderated and stabilized at 5 percent the last four months of the year. The moderation can be clearly seen at the state level, with Colorado, Texas and New York at the high-end of appreciation, ending the year with increases of about 8 percent.
“This contrasts with previous appreciation rates in the double digits—for instance, Nevada and California which experienced increases of more than 20 percent earlier in 2014.”
Across the country, prices are expected to slow.
“Nationally, home price appreciation took a pause in November and December 2014 and we expect a slow start to 2015,” said Anand Nallathambi, president and CEO of CoreLogic.
However, other states and MSAs will likely get a taste of what Denver has been experiencing.
“As the year progresses, we expect upward pressure as low inventories and more first-time buyers drive up home prices,” Nallathambi, 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 Co. and 8z Real Estate. To read more articles by John Rebchook, subscribe to the Colorado Real Estate Journal.