Highlights:
Case-Shiller releases June report today.
Denver ranks No. 13 for appreciation.
Home prices rise 9.4%
Housing prices in the Denver area hit an all-time high in June, besting the previous record set in May, according to the closely watched Case-Shiller report released today.
In May, Denver and Dallas were the first two of the 20 major markets tracked by the S&P/Case-Schiller Home Price Indices to exceed pre-recession home prices, and both markets rose 1.7 percent in June from May.
“Congratulations, Denver,” independent broker Gary Bauer said about the record.
On a year-over-year basis, Denver home prices rose 9.4 percent in June, which ranked it 13th of the 20 metropolitan statistical areas in the city.
“All time record prices coupled with all time record sales. That’s what I’d call a strong market,” said Lane Hornung, founder and CEO of 8z Real Estate.
“Home price appreciation and sales volume have both been on a tear in the first half of 2013,” Hornung said.
However, he and others said that kind of pace is not sustainable.
“In the second half, I expect home prices to continue to rise, but not as rapidly,” Hornung said.
“The market is transitioning to a less frenzied, more balanced market. Buyers can think in terms of days, not hours. However, a less frenzied market should not be confused with a slow market.”
Seasonal slowdown is normal
A seasonal slowdown is no cause for alarm, Hornung said.
“It’s sort of amusing reading the press releases from national real estate websites predicting that the market will slow down,” Hornung said
“Predicting that real estate sales will drop as we move from the summer into the fall is like predicting that it will snow in the mountains this winter,” Hornung said.
“Of course sales will slow down due to seasonal factors, just like they do every year,” Hornung continued. “The real question is: will sales slow down more or less than usual at this time of year? Based on what’s happening at the street level in today’s market, and despite the threat of rising interest rates, it looks like we’ll continue to see strong sales volume and less seasonal slow down than is usual this fall.”
Peter Niederman, CEO of Kentwood Real Estate, is on the same real estate page as Hornung.
“Another great month,” Niederman said about the Case-Shiller report.
“We are in the middle of the pack and that is a great place to be,” Niederman said.
A year-and-half of improvement
June was the 18th consecutive month that Denver prices were higher on a year-over-year basis. It also was the sixth consecutive months of prices rising more than 9 percent, year-over-year.
Denver, however, trailed the overall 12.1 percent year-over-year increase for the 20 cities in the Case-Shiller index.
Niederman noted that nationally, June marked at least the fourth consecutive month of double-digit price increases for all 20 of the cities.
“Housing has momentum,” said Niederman, adding that he is glad that Denver isn’t seeing the almost 25 percent year-over-year appreciation in cities like San Las Vegas and San Francisco, as that hurts housing affordability and is not sustainable.
“Those markets are experiencing price increases that are in the stratosphere,” Niederman said.
Bauer agreed.
“Some of these high-volatility markets like Phoenix and Las Vegas right now are flying their flags high, but when they do crash, they have a long way to fall,” Bauer said.
“The value in Denver is that we do not have really high highs and really low lows,” he said. “Instead, Denver is a nice, steady consistent market.”
Rising interest rates
Niederman said that rising interest rates “could put a cloud over the housing market and could weaken sales by year-end,” both in Denver and across the country.
In addition, there will be a typical, seasonal slow down, he said.
“While I think there is still very strong demand for housing, we are going from very strong demand during the spring and most of the summer to more of a normalized market,” Niederman said.
“As I have said before, I think we are in a second year of a seven-year improving cycle,” Niederman said. “But no cycle goes up in a straight line.”
Appreciation could trump rising rates
He said he recently heard one national analysis that said the median price of a home across the country is now about $220,000.
The analyst projected that home prices on average, during the next three ears, would rise 6 percent annually, which compounded is about a 20 percent increase.
The typical home would increase in value by $44,000, while rising interest rates would add $3,600 to their mortgage payments.
“Wouldn’t you pay $3,600 for a $44,000 gain? I think that really puts it into perspective.”
He noted that a 6 percent gain is half the year-over-year increase for the 20 markets tracked by Case-Shiller in June.
“You might not get 6 percent each year,” Niederman said. “Price increases might be double-digit one year and flat the next, with no appreciation, so it averages 6 percent each year. Of course, there is no guarantee that will happen, but it seems like a pretty reasonable expectation.”
Ty Dokken, president of Metro Brokers, said the Case-Shiller report “was just what I expected.”
Eventually, he said he expects rising interest rates to slow down the market a bit, along with the normal seasonal slowing.
Short-term, however, rising interest rates will lead to more people signing on the dotted line, as consumers fear they will go even higher.
Current rates around 4.5 percent are still low by historic standards, although more than a full-percentage point higher than the all-time lows hit in the spring.
“I tell all of my clients to lock-in a 30-year-fixed rate mortgage,” Dokken said.
When rates first started to rise, some people wondered if it was a bit of a head-fake and they would drop again.
“Now, they know it is for real,” he said.
National snapshot
Across the country, price appreciation is slowing.
“National home prices rose more than 10 percent annually in each of the last two quarters,” noted David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices.
“However, the monthly city by city data show the pace of price increases is moderating,” he said.
“The Southwest and California have consistently led the recovery with Las Vegas, Los Angeles, Phoenix and San Francisco posting at least 15 months of gains,” Blitzer continued.
“Looking at the cities, New York recorded its highest monthly return since 2002. Atlanta was up the most at 3.4 percent and Washington, D.C. had the lowest return at 1.0 percent. In terms of annual rates of change, San Francisco lost its leadership position with Las Vegas showing the highest post-recession gain of 24.9 percent.”
However, the torrid price appreciation may not continue.
“Overall, the report shows that housing prices are rising but the pace may be slowing,” Blitzer said.
“Thirteen out of 20 cities saw their returns weaken from May to June. As we are in the middle of a seasonal buying period, we should expect to see the most gains. With interest rates rising to almost 4.6%, home buyers may be discouraged and sharp increases may be dampened.
“Other housing news is positive, but not as robust as last spring. Starts and sales of new homes continue to lag the stronger pace set by existing homes. Despite recent increases in mortgage interest rates, affordability is still good as credit qualifications have eased somewhat.”
Metropolitan Area
Change from Jan. 2000
May to June Change
1-Year Change
Atlanta
9.15%
3.4%
19.0%
Boston
64.75%
1.7%
7.8%
Charlotte
23.41%
1.3%
7.3%
Chicago
21.81%
3.3%
3.5%
Cleveland
5.35%
1.9%
8.0%
Dallas
29.78%
1.7%
9.4%
DENVER
43.37%
1.7%
16.4%
Detroit
87.41%
1.7%
24.9%
Las Vegas
17.29%
2.8%
19.9%
Los Angeles
2.10%
2.3%
14.8%
Miami
67.10%
2.1%
11.5%
Minnesota
32.47%
2.3%
3.3%
New York
68.65%
2.1%
19.8%
Phoenix
37.36%
1.8%
11.8%
Portland
54.80%
1.9%
19.3%
San Diego
84.57%
2.8%
24.5%
San Francisco
73.01%
2.7%
11.8%
Seattle
56.46%
1.8%
11.1%
Tampa
47.69%
2.1%
5.7%
Washington, D.C.
100.09%
1.0%
5.7%
Composite-10
73.37%
2.2%
11.9%
Composite-20
59.54%
2.2%
12.1%
Month
Ranking
YOY Change
January 2010
6
2.6%
February
5
3.6%
March
7
4.1%
April
8
4.4%
May
8
3.6%
June
9
1.8%
July
11
-0.1%
August
11
-1.2%
September
9
-3.1%
October
7
-1.8%
November
6
-2.5%
December
7
-2.4%
January 2011
6
-2.3%
February
5
-2.6%
March
7
-3.8%
April
6
-4.1%
May
5
-3.3%
June
3
-2.5%
July
4
-2.1%
August
3
-1.6%
September
5
-1.5%
October
4
-0.9%
November
3
-0.2%
December
2
-0.4%
January 2012
3
0.2%
February
4
0.5%
March
3
2.6%
April
4
2.8%
May
3
3.7%
June
4
4.0%
July
4
5.4%
August
5
5.5%
September
6
6.7%
October
7
6.9%
November
8
7.8%
December
10
8.5%
January 2013
10
9.2%
February
10
9.9%
March
13
9.8%
April
13
9.9%
May
13
9.7%
June
13
9.4%
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John Rebchook has more than 30 years of experience in writing and communications. As the Real Estate Editor for the Rocky Mountain News, he wrote about residential and commercial real estate for 26 years. He has won numerous awards for business stories and columns that he wrote, both as an individual and part of teams. In addition to real estate, he also covered economic development, banking and financing, the airlines, and cable TV for the Rocky. In addition, he was one of the original freelance writers for GlobeSt.com, covering commercial real estate for the Internet publication.!
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