Hi all! Here’s a fantastic article by our friends over at Inside Real Estate News – its a fantastic update on the Denver market…including what has been happening, what’s happening now, and what’s probably going to happen moving forward into 2015. Its chocked full of great information whether you are buying or selling in Denver…so grab a cup of coffee and be sure to read ALL of it….enjoy!
The Denver-area housing market was ranked 6th in the nation by the closely watched Case-Shiller index released today.
Denver’s 6.2 percent year-over-year appreciation rate in September was better than all but five of the 20 large metropolitan statistical areas tracked in the S&P/Case-Shiller Home Price Indices.
It marked Denver’s best ranking in two years, although it was also the lowest year-over-year percentage increase in about two years.
Denver easily out-paced the average year-over-year gain of 4.9 percent for the 20 MSAs, as well as the U.S. average of 4.8 percent.
Although home price gains in Denver have been falling since March, September also marked the eighth consecutive month of record prices in Denver.
“Both the non-seasonal index and the seasonally-adjusted index ticked up a tenth of a point, from 6.3 percent to 6.2 percent, on a year-over-year basis,” noted Lane Hornung, CEO of 8z Real Estate.
“You can’t get a much softer landing than that as our appreciation rates glide gently into the 5 percent to 6 percent range,” Hornung said.
Hornung noted that Denver’s housing market is out-performing other national predictions.
Zillow got it wrong
Denver’s home appreciation, at a time when the inflation rate is a mere 1.7 percent, “is much higher than the 1.8 percent appreciation that Zillow predicted for 2014 appreciation at the start of the year, and significantly higher than Zillow’s mid-year revision to 3.8 percent,” Hornung said.
“Zillow is just one of the many so-called national experts that have consistently underestimated the strength of our market,” Hornung said
“As we approach the end of the year, the question is not if our prices are going to drop; they’re going to keep rising,” Hornung said.
“It’s whether our market will land in the 5-6 percent range, or if it will turn out to be a “touch and go” and the year-over-year appreciation rate will starts to rise again,” Hornung continued.
“Based on the activity we’re seeing in the market today, which is much higher than is typical at the this time of year, I’d give it a better than 50 percent chance that the Case-Shiller seasonally-adjusted index ticks up a tenth of a point or two in the months ahead,” Hornung aid.
Peter Niederman, CEO of Kentwood Real Estate, said he is pleased with Denver’s ranking by Case-Shiller and the direction of the Denver market.
“Everything looks great,” Niederman said.
Slow and steady wins the race
He said Denver’s overall ranking is the latest sign of how steady the local housing market has been, compared to many other cities.
“Denver has moved from sort of the middle of the pack,” to one of the top cities in the nation, he said.
“Denver is moderating like all of the other cities, but Denver does have the higher peak-to-trough swings like many other cities,” Niederman said.
Nationally and in Denver, with prices moderating and interest remaining low, affordability is improving, he said.
He said he expects that Denver home prices will continue to moderate.
“it wouldn’t surprise me if instead of a 6.2 percent year-over-year increase, we see something like a 4 or 5 percent year-over-year increase,” Niederman said.
“There is nothing wrong with that,” he added. “If it happens, I would be thrilled.”
Home appreciation out-pacing inflation
He said that the increases are coming at a time when inflation is so low is significant.
“That prices are rising three time the inflation rate is pretty incredible,” Niederman said.
Or as Hornung put it earlier: “That is a huge differential and means homeowners are accruing real, not nominal, gains in their personal net worth. I’m guessing that people have never experienced such a big differential between home price appreciation and the inflation rate.”
In October, there were only 6,748 unsold single-family homes and condos on the market, an 11.45 percent drop from October 2013 according to the Denver Metro Association of Realtors.
And there were 4,357 homes under contract in October, according to DMAR, a 20 percent drop from October 2013.
“It wasn’t that long ago we had over 30,000 homes in the active inventory and under contract and now it is about 10,000,” Niederman said.
“My prediction is that we are going to see even lower activity inventory and under contract numbers in November, when the Metrolist numbers come out,” Niederman said.
The biggest surprise for Steve Blank, a broker with Fuller Sotheby’s International Realty, has been the strength of the condo market in the Denver area.
“This is the first period I have ever seen when condo prices are rising faster than single-family home prices,” Blank said.
Part of that is that because of fears of construction defect litigation that there are few condo projects being built, crimping the supply, especially at the lower price range, he said.
With apartment rents rising to record levels, he expects that in 2015, “Millennials will recognize they plan to be in Denver for the long haul and will scrape together a 5 percent or 10 percent down payment and buy a starter condo or townhome.”
He expects interest rates will begin to rise next year, which will bring some urgency to the market.
“I think people have been lulled to sleep by interest rates that have been so low for so long,” Blank said.
Rates expected to rise
“Heaven forbid that they should rise to 5.5 percent of 6 percent,” Blank said.
“Young people are going to go, “Oh, my God. While those of us who have been around for a while will say, “What took them so long?”
Independent broker Gary Bauer said that the Case-Shiller report reflects that the frenzied market in the early part of the year is over and has been replaced with a typical seasonal slowdown.
“It’s going to be a great year for housing in Denver,” Bauer said.
“We are not going to have quite as many sales as we did in 2013, but our dollar volume is going to be a record year in terms of dollar volume.”
Meanwhile, nationally, the housing market slowed in September.
“The overall trend in home price increases continues to slow down,” said David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices.
“The National Index reported a month-over-month decrease for the first time since November 2013,” Blitzer continued.
“The Northeast region reported its first negative monthly returns since December 2013 and its worst annual returns since December 2012 due to weaknesses in Washington D.C. and Boston,” he said.
“The West and Southwest, previously strong regions, are seeing price gains fade,” he noted.
“The only region showing any sustained strength is the Southeast led by Florida; price gains are also evident in Atlanta and Charlotte,” Blitzer said
“The 10- and 20-City Composites continued their year-over-year downward trend, gaining 4.8 percent and 4.9 compared to last month’s year-over-year gains of 5.6 percent,” he said.
“Las Vegas, which has shown double-digit annual gains, posted an annual return of 9.1 percent, its first time below 10 percent since October 2012,” Blitzer continued.
“Miami, however, continues to impress with another double digit annual gain of 10.3 percent,” he said. It is the only city that currently has a year-over-year double digit gain. Charlotte was the only city in September to show an annual increase relative to last month.”
Eighteen of the 20 cities reported slower annual gains compared to last month.
“Other housing statistics paint a mixed to slightly positive picture,” Blitzer said.
“Housing starts held above one million at annual rates on gains in single family homes, sales of existing homes are gaining, builders’ sentiment is improving, foreclosures continue to be worked off and mortgage default rates are at pre-crisis levels. With the economy looking better than a year ago, the housing outlook for 2015 is stable to slightly better.”