Wednesday, April 25, 2012

Denver Case-Shiller index up for second month in a row

Case-Shiller released its home price index for February today. The home price index for the Denver area fell 0.9 percent percent from January to February, but rose 0.5 percent, year over year, from February 2011 to February 2012.  The year-over-year increase in February was the second year-over-year increase in a row for Denver, and was the second increase overall since June 2010. The first graph shows the index values since 2001:

According to S&P's press release, home prices are still facing headwinds:

“While there might be pieces of good news in this report, such as some improvement in many annual rates of return, February 2012 data confirm that, broadly-speaking, home prices continued to decline in the early months of the year,” says David M. Blitzer, Chairman of the Index Committee at S&P Indices. “Nine MSAs -- Atlanta, Charlotte, Chicago, Cleveland, Las Vegas, New York, Portland, Seattle and Tampa -- and both Composites hit new post-crisis lows. Atlanta continued its downward spiral, posting its lowest annual rate of decline in the 20-year history of the index at -17.3%. The 10-City Composite declined 3.6% and the 20-City was down 3.5% compared to February 2011".

In year-over-year comparisons for February, Atlanta showed the largest drop, with a decline of 17.3 percent, while the index in Las Vegas fell 8.5 percent. Year over year, home price indices fell in 15 of the 20 cities included in the study. Only Detroit, Denver, Minneapolis, Miami and Phoenix showed increases.

The second 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.

The 20-city composite is down 35 percent since it peaked in July 2006, but the Denver index is down only 13 percent from its August 2006 peak.

Although the Denver index turned positive in February compared to February of last year, the Denver index during February was at levels comparable to those found during 2002.

The third 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, and the rates of decline in Denver have been smaller in recent months. The year-over-year change in the 20-city composite during February was negative with a decrease of 3.5 percent while Denver reported a slight increase for the second month in a row. In the 20-city index, the year-over-year change has been negative for the past 17 months.

The last chart provides a closer look at year-over-year changes in the Denver index. Note the the change was below zero between June 2010 and December 2011, 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. Since the end of the credit, however, home prices consistently drifted downward until January 2012.