Weiss Index: Denver tops U.S. home appreciation

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Highlights:

  • Denver hottest home market in country.
  • Report released by co-founder of Case-Shiller.
  • Size matters, according to Weiss Residential Indexes.
This 2,745-square-foot, 3-bedrrom, 2-bathroom home at 10916 Pastel Point in Parker, just hit the market for $399,950. The Denver area is the hottest market in the nation, according to a the Weiss report, published by  the former  CEO of Case-Shiller, Denver home prices will be higher a year from now.

This 2,745-square-foot, 3-bedroom, 3-bathroom home listed by 8z Real Estate in Parker, just hit the market for $399,950. The Denver area is the hottest market in the nation, according to the Weiss report, published by the former CEO of Case-Shiller, Denver home prices will be higher a year from now, Weiss told Denver Real Estate Watch.

Denver is the hottest housing market in the nation, according to a report released on Wednesday by Allan Weiss, the co-founder and former CEO of the closely followed Case-Shiller index.

“My take on Denver that it is the hottest market we are tracking, among the largest ones,” said Weiss, founder and CEO of Weiss Residential Research. It publishes the Weiss Residential Indexes that tracks home appreciation in 5,500 ZIP Codes in 100 metropolitan areas across the country.

On Wednesday, it released findings for the top 10 major markets in the U.S.

The Weiss report found that 84 percent of the homes  in the Denver area in May had appreciated.

That is 30-percentage point higher than the national average of 54 percent.

Weiss bases his data on repeat sales of 100 million homes. Case-Shiller also uses repeat sales of homes.

Still, that is down from May 2014, when 95 percent of the homes in the Denver-area market were appreciating.

Denver not facing a bubble

And that is good, Weiss said. In markets where every home is rising is a sign of a bubble, Weiss said.

“Denver is in no danger of a bubble,” Weiss said.

“It’s not like San Francisco, where in May of last year 97 percent of the homes were rising in value and now that has dropped to 65 percent,” he said.

Because of bidding wars and multiple offers, increasingly $40,000 or $50,000 above the asking price, some consumers and even some Realtors are wondering if consumers are better off waiting for the market to cool and pick up homes later.

That could be a strategy in other cities, such as Washington, D.C., but not Denver, Weiss said.

If you wait to buy in Denver, you’ll pay more

“I think it is very likely that virtually every house in Denver, if not every house in Denver, will be more valuable a year from now than it is today,” Weiss said.

The only thing he believes could drive down homes prices in Denver would be an unexpected, macro-event, he said.

“Barring some kind of Black Swan event, which we cannot anticipate, I don’t see anything on the horizon that would drive down home appreciation in Denver,” Weiss said.

In fact, very few homes are losing value in the Denver area, he said, even though his report shows 84 percent appreciating.

“I wouldn’t say 16 percent of the homes on the market in Denver are falling,” Weiss said.

His report defines appreciating homes as those gaining at least 1 percent in value.

“My suspicion is that most of the homes in Denver that are not ‘appreciating’ are falling into the 1 percent, plus or minus, of fuzziness,” Weiss said.

Homes that are not rising in value, are “stagnating” rather than losing value, he said.

Size Matters

However, size matters, in Denver and across the country.

In Denver, small homes in May showed a year-over-year appreciation, of 9 percent, medium-sized homes rose by 7.2 percent, and large homes gained 5.2 percent.

Denver was No. 1 in each category.

The size varies from market to market.

In the Denver area, a small homes has less than 1,300 square feet, a medium-sized home has 1,300 to 2,000 square feet and a large home has more than 2,000 square feet.

Looking at the Denver data, Weiss said the only homes that seem to be losing value are those built in the 1950s that are listed at a high price.

“I don’t see any pockets in Denver where home values are falling,” Weiss said.

“Now, there are a few pockets in Denver that are not as strong as the overall market, which is normal,” Weiss said.

“If you are listing your home for too much money, you will know pretty quickly because you won’t get any offers,” Weiss said.

Nationwide Snapshot

Nationwide, about a third fewer homes gained value in the heart of the spring selling season, when compared to May 2014, according to Weiss.

In the Washington, D.C. market, weakest of the top 10, only 34 percent of houses gained value in May compared to 57 percent in May 2014.

“Don’t be fooled by averages,” Weiss said.

“All of the largest metro indexes (including Denver) are rising more slowly than they were a year ago though market reports give the impression that values are rising across the board,” Weiss said.

“However people don’t own the entire market; they own one house,” Weiss pointed homes.

As real estate brokers like to say, all homes are local.

“Today, conditions at the local level may not be as positive as national reports indicate,” Weiss said.

And buying a house is not like buying a stock, where every share is the same.

“Every house is unique, has a unique value and responds differently to market changes,” Weiss said.

He agrees with local brokers who say that just because home prices are at record levels that all homes will command premium prices.

And sellers should be watching their wallets carefully, when buying homes, especially outside of Denver, which is bucking the national trend.

“In today’s market, sellers should price their homes very carefully and research local conditions to avoid overpricing that could lead to an extended time on market in case prices do decline,” Weiss said.
“In this climate, buyers and investors should be careful to avoid buying a home that is on the verge of losing value,” said Weiss.

Weiss Residential Research publishes Weiss Maps that displays houses as color-coded dots with appreciating houses in shades of green and depreciating houses in shades of red.  Like weather maps, these maps are dynamic and show each recent month in succession bringing the market to life.

RealtyTrac 

Meanwhile, in Denver, the average home price gained 29 percent in the first half of the year, compared with the first half of 2014, according to separate report by RealtyTrac.

Only San Jose and San Francisco, showed greater percentage gains, at 41 percent and 37 percent, respectively, according to RealtyTrac.

Home sales in Denver also were at a 10-year high at the end of june, according to RealtyTrac.

“Particularly, in the first-time home buyer market, we are seeing multiple offers and in many cases sellers are choosing the cash offer over FHA or conventional financing,” Greg Smith, owner/broker at RE/MAX Alliance, told RealtyTrac.

“This can skew the numbers of the actual makeup of buyers in the marketplace,” Smith continued.

“As we continue to see the market move towards equilibrium we should continue to see the FHA numbers grow and a slight decrease in cash buyers,” according to Smith.

Metro Area% of homes rising in value in May% of homes rising in value May 2014.Small home 1-year value change in May.Medium home 1-year value change in May. Large home 1-year value change in May.
Denver84959.0%7.2%5.8%
San Francisco65974.8%4.0%3.5%
Seattle62871.7%1.7%1.7%
Miami59904.0%3.7%2.0%
Atlanta57843.9%3.6%3.2%
Chicago68652.8%2.6%1.8%
Phoenix47792.1%1.2%0.1%
Los Angeles46941.3%1.0%0.4%
New York40580.2%0.3%0.0%
Washington, D.C.3457-0.2%-0.4%-0.7%

Source: Weiss Residential Indexes

Have a story idea or real estate tip? Contact John Rebchook at JRCHOOK@gmail.com. DenverRealEstateWatch.com is sponsored by 8z Real Estate. To read more articles by John Rebchook, subscribe to the Colorado Real Estate Journal.

 

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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 GlobeSt.com, covering commercial real estate for the Internet publication.

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