Tuesday, February 22, 2011

Denver's Case-Shiller home price index declines for sixth month in a row

Case-Shiller’s home price index for the Denver area fell 0.7 percent from November to December, and fell 2.4 percent , year over year from December 2009 to December 2010.

According to the Case-Shiller report, released today by Standard and Poor's, and containing data up through December, 13 of the 20 metro areas measured by the report showed larger declines than the Denver area.

In year over year comparisons for December, Detroit showed the largest drop, with a decline of 9.1 percent, while the index in Atlanta fell 8.0 percent. The index rose the most in Washington, DC where it increased 4.1 percent, year over year. The index also rose 1.7 percent in San Francisco. Home price indices fell in 18 of the 20 cities included in the study.

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.

The 20-city composite is down 31 percent since it peaked in July 2006, but the Denver index is down only 11.5 percent from its August 2006 peak.

The second chart compares year-over-year changes in the Denver area index and in 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 during December was negative with a decrease of 2.4 percent. The Denver area index’s fall of 2.4 percent is the sixth month in a row in which the growth rate has been negative. In the 20-city index, on the other hand, the year-over-year change has only been negative for the most recent three months.

While Denver’s index has been largely stable, note that for the previous 24 months, only 8 months have shown a positive year-over-year change.

The last chart compares the actual index value for the Denver area with the year-over-year change. Note that for July through December, 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.

Nationally, Case-Shiller has raised the possibility of a double dip in real estate prices as indices nationwide dip further and are nearing the same levels that were experienced during the trough of the market during late 2008 and early 2009.

Case-Shiller’s take on the most recent data:

We ended 2010 with a weak report. The National Index is down 4.1% from the fourth quarter of 2009 and 18 of 20 cities are down over the last 12 months. Both monthly Composites and the National Index are moving closer to their 2009 troughs. The National Index is within a percentage point of the low it set in the first quarter of 2009. Despite improvements in the overall economy, housing continues to drift lower and weaker.” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor's. “Unlike the 2006 to 2009 period when all cities saw prices move together, we see some differing stories around the country. California is doing better with gains from their low points in Los Angeles, San Diego and San Francisco. At the other end is the Sun Belt – Las Vegas, Miami, Phoenix and Tampa. All four made new lows in December. Also seeing renewed weakness are some cities that were among the last to reach their peaks including Atlanta, Charlotte, Portland OR and Seattle, where news lows were also seen. Dallas, which peaked late, has so far stayed above its low marked in February 2009.