Wednesday, April 27, 2011

Case-Shiller: Denver home prices down for eighth month

Case-Shiller’s home price index for the Denver area fell 1.2 percent from January to February, and fell 2.6 percent ,year over year from February 2010 to February 2011.

According to the Case-Shiller report, released today by Standard and Poor's, and containing data up through February, 14 of the 20 metro areas measured by the report showed larger declines than the Denver area. The report shows a general decline in home prices across the nation, with only one metropolitan area, Washington, DC, showing and increase in home prices over the past year. According to the Case-Shiller press release:

'There is very little, if any, good news about housing. Prices continue to weaken, trends in sales and construction are disappointing.' says David M. Blitzer, Chairman of the Index Committee at S&P Indices. 'Ten of the 11 MSAs that recorded index lows in January fell further in February. The one exception, Detroit, is 30% below its 2000 price level. The 20-City Composite is within a hair’s breadth of a double dip. Fourteen MSAs and both Composites have continued to decline month-over-month for more than six consecutive months as of February.'

In year over year comparisons for February, Phoenix showed the largest drop, with a decline of 8.4 percent, while the index in Minneapolis fell 8.3 percent. The index rose the most in Washington, DC where it increased 2.7 percent, year over year. Home price indices fell in 19 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. Prices have been largely flat since mid-2009, but continue a slow trend downward.

The 20-city composite is down 33 percent since it peaked in July 2006, but the Denver index is down only 13.5 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 February was negative with a decrease of 2.6 percent. The Denver area index’s fall of 2.6 percent is the eighth month in a row in which the growth rate has been negative. In the 20-city index, the year-over-year change has only been negative for the most recent five months, although the index has now dropped further in the 20-city index, year-over-year, than in the Denver index for the second month.

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 provides a closer look at year-over-year changes in the Denver index. Note that for July through February, the change has fallen below zero, and likely reflects the end of the homebuyer tax credit’s end which has led to 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.

The chart shows that from July 2010 through February 2011, the home price index has been below the index for the same period a year earlier (July 2009 through January 2010). Given that 2009 was itself a weak year for home sales, this data does not suggest a speedy rebound for home prices.