Home prices hint at turn
S&P report suggests Denver area may be starting to recover
By John Rebchook, Rocky Mountain News September 27, 2007
Fresh evidence suggests the Denver-area housing market may be in the early stages of recovery, even as the national housing market faces an even bigger slump.
From May to June, Denver homes showed a 1.3 percent appreciation in value, the highest of 20 metropolitan areas surveyed, according to the Standard & Poor's/Case Shiller Home Price Indices. Charlotte, N.C., was No. 2 at 1.2 percent.
And while Denver home prices dropped by 0.7 percent in July from July 2006, only five metropolitan areas fared better during that period, the survey showed. Overall, a composite of 20 major metropolitan areas experienced a 3.9 percent drop during that one-year period.
"We need to see if the trend continues," said S&P Vice President Maureen Maitland, referring to Denver. "What you have to do now is to watch for signs of a turnaround before calling anything,"
She said Denver has been beating the nation as a whole for four consecutive months. From June to July, for example, Denver's market appreciated by 0.8 percent, with only Detroit doing better at 1.3 percent, and all 20 areas dropping by an average of 0.6 percent.
The report is produced by S&P and Yale University economist Robert Shiller.
The nation as a whole is "in a bit of a housing crisis, and it is likely to get worse before it gets better," Maitland added.
Adjusting for inflation, housing prices nationwide have soared by 86 percent in the past decade. Some cities, such as New York, Los Angeles and Washington, D.C., saw larger jumps than other places in the country, including Denver.
The Denver-area housing market peaked in February 2001, with a 15 percent year-over-year appreciation, slightly higher than the nation as a whole, Maitland said.
"Many other markets across the country continued on an upward swing, and the Denver growth rate slowed down," she said. "Now, Denver seems to be going in an upward direction."
Economist Michael Kone, principal of Boulder-based Housingmetrics, said there is still "intense pain" for the lower end of the housing market in the Denver area, with a "huge bump" in foreclosures to come, as subprime mortgages adjust upward.
Colorado is on pace to see more than 37,000 foreclosures filed this year, a 30 percent increase over the record set last year. Colorado and the Denver area are among the top 10 worst areas in the county for foreclosure rates.
Expensive houses, Kone said, are doing much better in the metro area. Also, as always, there are pockets of strength.
The S&P/Case Shiller report also illustrates that housing is a bargain in the Denver area compared with many other places, said Mike Foster, director of land acquisitions for Century Communities, a private, suburban builder.
Not long ago, Denver was the most expensive housing market "anywhere in the U.S. without a beach," Foster said.
But because the Denver-area housing market has been flat for so many years, it will recover faster than other areas that, until recently, saw a huge run-up in prices, he said.
"Denver is a low-risk market," Foster said. "It will be easier for companies to relocate to our market than to relocate to other markets."
Independent broker Gary Bauer, who puts out his own monthly report based on Metrolist data, said that the S&P/Case-Shiller report is encouraging.
"Basically, it is saying what I have been saying for quite a while - Denver is counter-cyclical to the rest of the nation," Bauer said. "Is it all roses in the Denver marketplace? No. But it is not as bad as all of the doom-and-gloom talk, either."
The top-performing metropolitan area, according to the national study, was Seattle at 6.9 percent, followed by Charlotte, N.C., at 6 percent. Other cities faring better than Denver included Portland at 3.8 percent; Atlanta at 1.2 percent; and Dallas at 0.8 percent.
rebchookj@RockyMountainNews.com or 303-954-5207.
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