Denver-area homes rose by 6.7 percent in July from July 2013, according to the closely watched Case-Shiller report that was released today.
Denver tied with Atlanta for 11th place for the 20 metropolitan statistical areas tracked in the S&P/Case-Shiller Home Price Indices.
The last time Denver prices were up 6.7 percent was in September 2012, when Denver ranked No. 6. In August 2012, Denver prices were up 5.5 percent, which was good enough for fifth place.
Nationwide, the year-over-year overall price appreciation in July was 5.6 percent, according to Case-Shiller.
Denver’s ranking in July was the best since it ranked No. 10 in February 2013.
July also marked the fifth consecutive month that Denver home prices have set a record as far as prices.
“Denver home prices set another record high….ho hum,” Lane Hornung, CEO of 8z Real Estate quipped
“Facetiousness aside, our appreciation rates continue to moderate and have almost reached the 4-to-6 percent range many analysts, myself included, predicted for 2014,” Hornung continued.
“The question now becomes — where do prices go from here? Will we stabilize in the 4-6 percent year-over-year appreciation range, or will that be a short-lived stop on the way to lower appreciation rates, possibly even lower absolute prices and negative appreciation rates in 2015?”
Hornung thinks he knows the answer to the questions he posed.
“Based on the continued lack of supply in the low and mid-price ranges and in new construction constrained mature neighborhoods, I’ll place my bet on stabilizing in the 4-6 percent range through the end of 2104 and the first half of 2015,” Hornung said.
“We are slowly returning to a “normal” market of moderate but sustainable appreciation and 4 to 8 months of inventory.”
The Case-Shiller appreciation rate was slightly lower than previous reports by Metrolist and the Denver Metro Association of Realtors, which showed about a 7.5 percent year-over-year gain.
Case-Shiller uses a different methodology, tracking same home sales, instead of all of the homes used that month.
From June to July, Denver prices rose by 0.6 percent, the same as the overall increase for the 19 other makers tracked by Case-Shiller and slightly higher than the national month over month increase of 0.5 percent.
Month-to-month, Denver tied for 7th place with five other markets.
Peter Niederman, CEO of Kentwood Real Estate, agreed with Hornung’s assessment of the Denver-area market.
“I like where Denver is,” Niederman said.
“We are moderating back to more of a normalized market, with price appreciation getting away from close to double digits,” Niederman said.
“The media wants to make it sound like gloom and doom, but it really is not,” Niederman said.
The Denver-area market could still use some more homes to sell, he said.
“We still have a sub 3-month supply of homes on the market; in fact, we are closer to two months of supply,” Niederman said.
From “peak to trough,” Denver not been the roller coaster ride of some other markets such as Phoenix, Miami and Las Vegas, he noted.
“It is great to have these big increases in prices to help some people whose mortgages were underwater able to transact real estate again, but double-digit appreciation is very hard to sustain,” Niederman said.
Also, rapid rises in home prices makes housing unaffordable for many first-time home buyers, he noted.
Chris Mygatt, president of Coldwell Banker Residential Brokerage Colorado, also liked the 6.7 percent appreciation rate and Denver’s middle of the pack ranking reported by Case-Shiller.
“Some people may be initially disappointed that prices have moderated,” Mygatt said.
“I think our 11th place ranking is a great place to be,” Mygatt said.
When compared to other markets, Denver’s market is much healthier and more sustainable, he said.
“When you look at what has been happening in markets in Arizona and Miami, they are just catastrophically high,” Mygatt said.
“Nationally, I think it is good that prices are beginning to moderate a bit,” he added. “That speaks to real estate is a long-term investment, not a short-term way of making huge gains.”
With interest rates still low and prices rising moderately, the Denver market appears to be well positioned going forward, he said.
“Sellers still have to realize that price and condition still matter,” Mygatt said.
“If you try to put junk on the market, it will not sell for top dollar,” Mygatt said.
“Indeed, there are 9,000 homes on the market right now that have failed to sell,” he pointed out.
Independent broker Gary Bauer said the Case-Shiller report captured the direction of the Denver-area market.
“We did see the start of the seasonal slowdown around July,” Bauer said, after an extremely strong market from late April, May and June.
Many parents wanted to get into their home before the new school year started, which in many cases meant moving by July, he said.
“Talking to other brokers, there are still buyers out there,” Bauer said.
Also, while mortgage rates remain low, some consumers are worrying that they may start to rise sooner rather than later and want to buy before that happens, he said.
Nationwide, the July report reflects a slowdown in home appreciation, noted David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices.
“The broad-based deceleration in home prices continued in the most recent data,” Blitzer said.
“However, home prices continue to rise at two to three times the rate of inflation,” Blitzer noted.
“The slower pace of home price appreciation is consistent with most of the other housing data on housing starts and home sales,” Blitzer said.
He said the rise in August new home sales —which are not covered by the S&P/Case-Shiller indices — is a “welcome exception to recent trends.”
He also noted that while year-over-year figures are t”rending downward, home prices are still rising month-to-month although at a slower rate than what we are used to seeing over the past couple of years.”
San Francisco showed a 0.4 percent drop in July from June “its first decline this year and the only city in the red. New York tended to underperform over the past few years but it was on top for the last two months,” showing a 1.1 percent monthly gain, Blitzer said.