Denver-area home prices surged to an all-time high in March, according to the closely watched Case-Shiller report released today.
“Only Denver and Dallas have set new post-crisis highs and they experienced relatively lower peak levels than other cities,” said David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices, in the S&P/Case-Shiller Home Price Indices report.
For the second consecutive month, Denver showed a 9.1 percent year-over-year gain, ranking it 15th of the 20 metropolitan statistical areas tracked by Case-Shiller.
Overall, the 20 MSAs showed a 12.4 percent year-over-year gain.
March marked the 27th consecutive month that Denver home prices were above where they stood a year earlier.
On a month-to-month basis, Denver prices were up 1.4 percent in March, tied for fourth place with Miami.
The 20 MSAs showed a 0.9 percent increase from February to March.
A lack of inventory continues to be the biggest problem facing the Denver market, according to local experts.
”We stayed above 9 percent year over year appreciation in both the non-adjusted and the seasonally adjusted indices showing continued strength in our markets,” said Lane Hornung, CEO of 8z Real Estate.
Hornung: Home shortage continues
“The lack of supply, not affordability issues, remains the primary driver of this market,” Hornung continued.
“The result is rising prices and year over year declines in transactional volume as buyers struggle to find enough quality listings to purchase,” Hornung said.
Peter Niederman, CEO of Kentwood Real Estate, said because the Case-Shiller data are 60 days old, its most important role is to show how Denver stacks up against other major metropolitan areas across the country.
“The most important take away from Case-Shiller is that it shows the strength of the national real estate market,” Niederman said.
“For Denver to be over 9 percent, a near double-digit annual price increase and to be ranked 15 out of 20 MSAs, tells you just how strong the U.S. real estate market is,” Niederman said.
“It is just spectacular.”
Niederman noted that last week the Wall Street Journal reported that despite rising home prices, 18.8 percent of the homes in the U.S. with a mortgage are underwater. That is, they owe more than their mortgage market.
All told, that represents 9.7 million homes. An additional 10 million homes have less than 20 percent equity, making it difficult for the owners to sell, the WSJ reported, quoting Zillow statistics.
“Rising prices have been good for homeowners in Denver who were underwater, but now we have to keep our eye on the market to see if it becomes too pricey,” Niederman said.
He said he would not like to see the market become too expensive for first-time home buyers, companies that are thinking of relocating to the Denver area, or empty nesters wanting to retire here.
“I would like to see our price appreciation to settle down to the 4 percent to 6 percent range,” Niederman said.
Price appreciation already seems to be moderating in the Denver area, said Ty Dokken of Metro Brokers.
Dokken described the Case-Shiller report as “good news, but I would expect prices are going to be tailing off a bit.”
The reason is that the inventory seems to be growing, he said.
“There is still demand out there, but it seems like there are more for sale signs hitting the yards and more listings are coming up,” he said.
Also, sellers are not “over-pricing” their homes as much as they had in the past, he said.
However, there are still bidding wars, especially in popular neighborhoods.
One of his clients recently won a bidding war for a home in West Washington Park, paying $378,000 for a home listed at $367,000.
“We knew to get a single-family home in West Wash Park for less than $400,000 is pretty difficult, so we jumped allover it,” he said.
“But I don’t think we are seeing the frenzy we have experienced really for the past year and a half,” Dokken added.
Paul Brunger, a broker for Keller Williams, recently represented a client that won a bidding for a condo, paying only $1,000 above the asking price of $224,000.
It wasn’t just the price, however, that gave his client the edge.
“We were able to close quickly with no contingencies,” Brunger said.
Inventory woes remain
Independent broker Gary Bauer said the Case-Shiller numbers show that Denver remains a “very positive market. Buyers are continuing to find opportunities with the available inventory,” he said.
“It’s good to hear that Denver is not the No.1 market on Case-Shiller,” Bauer said.
However, he agrees with other brokers that a lack of inventory is the biggest problem facing the Denver market.
“When you talk to brokers on the street you will find that it is not uncommon for a home to get multiple offers hours after it is listed,” Bauer said.
“We are in the prime housing season and a lack of inventory is going to continue to push prices up,” Bauer said.
Nationally, the housing market is not as frenzied as it has been.
“The year-over-year changes suggest that prices are rising more slowly,” Blitzer said.
“Annual price increases for the two Composites have slowed in the last four months and 13 cities saw annual price changes moderate in March,” he said.
“The National Index also showed decelerating gains in the last quarter,” Blitzer continued.
“Among those markets seeing substantial slowdowns in price gains were some of the leading boom-bust markets including Las Vegas, Los Angeles, Phoenix, San Francisco and Tampa.
Still, prices are rising.
“Despite signs of decelerating prices, all cities were higher than a year ago and all but New York were higher in March than in February,” Blitzer said.
While only Denver and Dallas are experiencing new highs, Boston, Charlotte, Portland and San Francisco are very close, he said.
Other housing metrics to not paint a clear direction for the national market, he said.
“Housing indicators remain mixed,” Blitzer said.
“April housing starts recovered the drop in March but virtually all the gain was in apartment construction, not single family homes,” he continued.
“New home sales also rebounded from recent weakness but remain soft,” he said.Mortgage rates are near a seven month low but recent comments from the Fed point to bank lending standards as a problem,” Blitzer added.
“Other comments include arguments that student loan debt is preventing many potential first time buyers from entering the housing market.”
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