CaseShiller Home Price Hit New High

CaseShiller Home Price Hit New High

John Rebchook
Home prices in the Denver in May set a record, surpassing the previous high-water mark set in August 2006, according to the closely watched Case-Shiller index released today.

Denver and Dallas in May were the first two of the 20 metropolitan statistical areas tracked in the S&P Case-Shiller to best pre-recession price. “This is the first time any city has made a new all-time high,” said David Guarino, of S&P Down Jones Indices.Lane Hornung, president and founder of 8z Real Estate, had predicted that Case-Shiller’s analysis would show that Denver would set a record high in May.He was right on the money.“Denver home prices are higher than they have ever been. That’s right, EVER,” Hornung said.“The Denver market has surpassed the “bubble induced” highs recorded in 2006 by Case Shiller for both the seasonally adjusted index and the non-seasonally adjusted index,” Hornung noted.“Our market has completely recovered from the bubble bursting and is entering new territory as far as average home prices,” Hornung said.He cautioned, however that the index is an average for the entire market.

As the saying goes, all real estate is local.“There are home owners out there in certain price segments and areas that are still upside down and could not sell for the price at which they purchased,” Hornung said.“The Case Shiller average doesn’t have much meaning to them,” Hornung said.Rising tide raises all shipsStill, it is good news for the entire market.“Even home owners who bought at the peak in 2006 are benefitting from our rising home prices, and more and more of them enter the happy place of positive home equity with each passing month,” Hornung said.

In May, home prices in Denver rose by 9.7 percent on a year-over-year basis, according to the S&P/Case-Shiller Home Price Indices.  That is down slightly from the 9.9 percent year-over-year increase in April.For the second consecutive month, Denver ranked 13th of the 20th cities tracked by Case-Shiller on a year-over-year basis.The Case-Shiller index shows that Denver’s price level in May stood at 140.98 percent, topping the previous record of 140.28 percent in August 2006.Denver has now experienced 17 months of consecutive price appreciation.Other cities, however, which had seen greater downturns during the Great Recession, in recent months have shown greater price appreciation than Denver.To show how much the nation’s market has changed, in May 2012, Denver had a 3.7 percent year-over-year increase and it ranked third of the 20 MSAs.“This is nothing short of spectacular,” said Peter Niederman, CEO of Kentwood Real Estate. “These numbers are phenomenal.”However, such big increases in prices are neither sustainable nor wanted, he said.“Short-term, these numbers are helpful, because it could mean some people who were under water now may have some equity in their homes and can transact real estate,” Niederman said.

“Now, what we have to keep an eye on is housing affordability,” Niederman said. “The housing affordability index is really a three-legged stool composed of interest rates, median home prices and household incomes. Ideally, they should all be in harmony. You want a balance between all three.”He said if Denver experienced the housing price increases north of 20 percent, as San Francisco, Atlanta, Las Vegas and Phoenix did, it would price too many people out of the market. That would discourage everyone from retirees to young people from moving here, as well as companies looking to relocate to the Denver area or expand their workforces here, Niederman said.Denver prices not in “skyrocket mode.”“With the strong buyer demand we have been seeing, the limited availability of rentals and the limited supply of new homes, even though new homes are coming back, we have seen price increases,” said independent broker Gary Bauer.“Although our prices have risen, we are not into a skyrocket mode,” Bauer said.“Denver is still very affordable and it is sustainable,” he said.As the traditional strong summer sales season starts to wind down, the Denver market is experiencing the typical slowdown, he said.Steve Blank, of Fuller Sotheby’s International Realty, said that “I just started saying that it seems like we are back at pre-recession pricing, but I did not know we are an an all-time high.”He said that he thinks consumer confidence is the driving force in the rising prices.“The biggest thing is that people are really starting to believe,” Blank said. “Consumer confidence is probably our largest asset.”Blank said that rising interest rates have not dampened demand for housing.“If anything, rising rates have spurred some people to buy and lock them in while they are still low,” Blank said.“Rates going from 3.25 percent to 4.25 percent or 4.5 percent, is sending a signal that we had hit bottom and we can’t be lulled to sleep by incredibly low interest rates,” he said.Hitting an all-time high in prices is “awesome,” said Liz Richards, a broker at Kentwood City Properties.However, it is not surprising, considering what she is seeing in the market.“I am seeing multiple offers and sale prices going beyond the asking price,” Richards said.“If a home does not go under contract within two weeks, it is clearly over-priced,” Richards said.“I tell my sellers if it does not have an offer quickly, than we need to re-examine the pricing.”She said that Lower Highland, or LoHi, is extremely hot.“LoHi has no inventory,” Richards said.
“As far as new construction available, it is at an all-time low. New construction is being sold before it is framed. LoHi is going through the roof.”Jefferson Park up and coming“As far as a great value-proposition, I think Jefferson Park is showing great growth and it will change exponentially over the coming years,” she said.“If you drive around Jefferson Park, it seems they literally are building something on every corner,” she said.“That, in turn, is going to bring more commercial,” Richards said. “Jefferson Park has tremendous upside. It was the red-headed step child for a while. We all thought it was going to really take off and then it was hit hard by the recession like all neighborhoods.
 She also said the development around Union Station is driving a lot of interest in downtown.“Actually, I don’t see a neighborhood in Denver central that is not doing well,” Richards said.“They are all getting top dollar,” she said. “I recently had a listing in Montclair. My client had popped the top and did a very modern renovation more like you would find in LoHi than in Montclair. But they received a very good price for it.”Anthony Rael, of RE/MAX Alliance, said that Case-Shiller’s data that shows prices at all-time highs confirms what he has seen on the street.“It certainly feels that way out in the marketplace,” Rael said.One area that has recently been extremely strong is Thraemoor in Lakewood, he said.“That is an area off Yale and Wadsworth where the real estate activity is commanding high prices and going very quickly,” Rael said.“In general, in any area, if the home is in move-in condition and is priced right is going very quickly,” he said.Cash is often king, However, it remains extremely difficult for consumers to win a bidding war for homes priced for less than $250,000, he said.Often, it is not the price. Rather, owner-occupants can’t compete with investors and others who are paying cash.“With the lower-priced stuff, people are going up against a lot of cash buyers,” he said.In a number of cases, his clients were willing to pay more money, but the sellers instead chose a cash buyer.“It is tough to explain to a client why the seller was willing to take $10,000 less than what my buyer was willing to offer,” Rael said.“You never know what is going to motivate a seller. A cash buyer might close within two weeks and waive the appraisal. I tell my buyers that the offer I wrote for you is going to take 35 to 45 days to close. Even though the seller is taking $10,000 less, the terms are more important to the seller than the extra money. It is very confusing to consumers.”In other cases, however, he has seen the highest price take the home, even if the highest bid requires a loan and an appraisal.“I’ve seen home selling for $10,000 above the asking price,” Rael said.National takeNationally, “home prices continue to strengthen,” said David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices.“Two cities set new highs, surpassing their pre-crisis levels and five cities – Atlanta, Chicago, San Diego, San Francisco and Seattle – posted monthly gains of over three percent, also a first time event.“The Southwest and the West saw the strongest year-over-year gains as San Francisco home pricesrose 24.5 percent followed by Las Vegas (23.3 percent) and Phoenix (20.6 percent). New York (3.3 percent), Cleveland (3.4 percent) and Washington DC (6.5 percent) were the weakest.“Monthly numbers before seasonal adjustment showed all 20 cities experienced rising prices. San Francisco (4.3 percent), Chicago (3.7 percent) and Atlanta (3.4 percent) were the leaders. However, two cities – Cleveland and Minneapolis were down slightly after seasonal adjustment.“The overall report points to some shifts among various markets: Washington DC is no longer the standout leader and the eastern Sunbelt cities, Miami and Tampa, are lagging behind their western counterparts.”

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Dated: July 31st 2013
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About Marc: Marc Blitstein has been a licensed Real Estate Agent since 2004. His real estate experience has most...

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