Tuesday, November 30, 2010

Home prices decline again in the Denver area according to Case-Shiller

Case-Shiller’s home price index for the Denver area fell 1.0 percent from August to September, and fell 1.6 percent , year-over-year from September 2009 to September 2010.

According to the Case-Shiller data, released today by Standard and Poor's, and containing data up through September, 12 of the 20 metro areas measured by the report showed larger declines than the Denver area.

In year over year comparisons for September, Chicago showed the largest drop, with a decline of 5.6 percent, while the index in Tampa fell 4.3 percent. The index rose the most in San Francisco where it increased 5.5 percent, year over year. The index also rose 5.0 percent in San Diego.

The first chart shows trends in the Case-Shiller index for the Denver area and for the 20-city composite index. It is clear that Denver did not experience the kind of price bubble that occurred in many other metropolitan areas, and consequently, the index has not fallen nearly as far in Denver compared to the larger composite. [Note: The two curves are reversed in this graph. The top curve is the 20-city composite, and the bottom curve is the Denver metro area.]

The 20-city composite is down 28.5 percent since it peaked in July 2006, but the Denver index is down only 9.2 percent from its August 2006 peak.

The second chart compares year-over-year changes in the Denver area index andin the 20-city composite. The Denver index did not achieve the rates of growth experienced by the national index, but the Denver index did not experience comparable rates of decline following the onset of the national recession either. Overall, the index has been less volatile in Denver than has been the case for the 20-city composite. Year-over-year growth in the 20-city composite is near zero with an increase of 0.6 percent for September. The Denver area index’s fall of 1.6 percent is the third month in a row in which the growth rate has been negative.

The last chart compares the actual index value for the Denver area with the year-over-year change. Note that for July, August, and September, the change has fallen below zero, and likely reflects the end of the homebuyer tax credit’s end which has translated into a fall in demand and a decline in the home price index. The upward trend in the index in response to the tax credit is clear during late 2009 and early 2010.

Case-Shiller’s take on the most recent data is that it reflects “broad-based declines” in the index:

"Nationally, home prices are 1.5% below their year-earlier levels. In September, 18 of the 20 MSAs covered by S&P/Case-Shiller Home Price Indices and both monthly composites were down; and only the two composites and five MSAs showed year-over-year gains. While housing prices are still above their spring 2009 lows, the end of the tax incentives and still active foreclosures appear to be weighing down the market."