- Case-Shiller releases December report.
- Denver home prices up 8.1% YOY.
- Denver home prices set record for 10th consecutive month.
Home prices in the Denver area soared by 8.1 percent in December from December 2013, according to the closely watched Case-Shiller report released today.
Only two cities, San Francisco and Miami, according to the S&P/Case-Shiller Home Price Indices.
The last time Denver ranked No. 3 of the 20 major metropolitan statistical areas tracked by Case-Shiller was almost in March 2012. The last time Denver ranked better was in December 2011, when it was No. 2.
December also marked 10 consecutive months of record home prices in Denver, according to Case-Shiller. The Case-Shiller report tracks home the change in prices of the same homes. By using that methodology, Case-Shiller hopes to prevent the “price drift” of more expensive homes entering the resale market.
In September, Case-Shiller showed a 6.2 percent year-over-year increase.
“We’ve jumped from just above 6 percent to over 8 percent,” Hornung said.
Driving up home prices, according to Hornung and others, is that there is a record low inventory of homes on the market.
In January, there were only 4,171 unsold homes on the 11-county area market, according to the Denver Metro Association of Realtors. That is a 33.8 percent drop from the 6,298 in January 2014, according to DMAR.
The lack of supply is pervasive, crossing most geographies and price segments.” Hornung said.
“On the demand side of the equation, things are heating up,” Hornung continued.
“More and more folks are moving to the Front Range, and for those that are already here, there seems to be a desire to buy before prices and/or interest rates move higher,” Hornung added.
“As a result, the spring market is already in full swing. My advice — buckle up.” Hornung said.
Peter Niederman, CEO of Kentwood Real Estate, agreed the lack of supply is driving up home prices.
The Case-Shiller report reflects Denver’s stability and resiliency, which did not see the huge peaks and valleys of so many other cities, he said.
“Denver is a real thoroughbred,” Niederman said.
However, prices are going up so fast that in some cases, homes are not appraising for the selling price, he said.
“That is a little bit of a new twist we are just starting to see,” Niederman said.
In some cases, the prospective buyers are willing to bring more money to the table to close the deal.
“They are willing to pay the delta, or the difference, if it is a small delta,” Niederman said.
Niederman also is concerned that with home prices rising so quickly, the Case-Shiller report is not all good news for Denver.
“It could be detrimental if Denver home prices rise so much that they become unaffordable for many people,” Niederman said.
Denver’s ranking in today’s Case-Shiller report is a cause for concern, said Chris Mygatt, president of Coldwell Banker Residential Brokerage in Colorado.
“This makes me nervous,” Mygatt said. “I do not like being at the top of this list.”
He said some people are starting to talk about bubble conditions in the Denver housing market.
“I think what is different now from the last time we were leading the country, is that this time we just don’t have any inventory,” Mygatt said.
He doesn’t see anything changing that this year or even in 2016.
“I wish I could pull level and accelerate the inventory, which we so desperately need,” Mygatt said.
“With so few homes on the market is hard to be a buyer and ironically, makes it hard to be a seller, as well,” he said.
However, the Case-Shiller report is great news if you are a homeowner, Mygatt said.
“The headline, in my mind, is that is this a great time to be a homeowner in Colorado,” Mygatt said.
“Congratulations to those who had the courage to stay in the game, when only a few years ago so many people said it was crazy to own a home in Denver and Colorado,” Mygatt said.
Indeed, he and others were saying that those who bought during the Great Recession would be extremely pleased a few years down the road.
He said home appreciation has exceeded his expectations. Especially, with interest rates being so low, homes have increased in value at a far greater pace than anyone had predicted, he noted.
Independent broker Gary Bauer said he was not surprised that Denver did so well in the Case-Shiller report.
“December was just an amazing, phenomenal month,” Bauer said. “It was an all-time record December.”
However, like others, he is concerned about housing affordability.
“Home affordability is an issue,” Bauer said. “We do have multiple offers on homes. That is an indication to both buyers and sellers the value of homes in our market today.”
Bauer said that home builders this year will try to meet the consumer demand for housing.
“New home builders are pulling out all of the stops and build homes as fast as they can,” Bauer said.
“New home builders will try to build 25 percent more homes in 2015 than they did in 2014,” he said.
Mygatt, however, said while new homes are needed, they can’t be brought to market to meet the demand. New homes at the lower-end are especially needed, he said.
“Unfortunately, as long as construction defect litigation is an issue, developers can’t take the risk of bringing affordable condos to the market,” Mygatt said.
State legislators have proposed a bill to address the construction defect litigation.
Outside of Denver, the national market was a mixed-bag in December, according to Case-Shiller.
Nine cities recorded higher monthly figures, and six posted decreases. Five cities reported relatively flat monthly changes for December.
“The housing recovery is faltering,” said David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices.
“While prices and sales of existing homes are close to normal, construction and new home sales remain weak.” Blitzer continued.
“Before the current business cycle, any time housing starts were at their current level of about one million at annual rates, the economy was in a recession.
In some ways, it is surprising that the national housing market is not stronger, he said.
“The softness in housing is despite favorable conditions elsewhere in the economy: strong job growth, a declining unemployment rate, continued low interest rates and positive consumer confidence,” Blitzer said.
“Movements in home prices show clear regional patterns. The western half of the nation plus Miami and Atlanta enjoyed year-over-year increases of percent or more. San Francisco and Miami were the strongest. Dallas, Denver, Las Vegas and Atlanta also experienced solid gains. Phoenix was an exception to the western strength with only a 2.4 percent increase; San Diego was a bit under 5 percent at 4.8 percent.
“The Midwest and Northeast lagged. Boston was the strongest among this weak group with prices up 3.8 percent. The regional patterns and the weakness in new construction and new sales may reflect decreasing mobility – fewer people moving to different parts of the country or seeking jobs in different regions.”
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