Tuesday, May 29, 2012

Denver home prices grow more than in most US cities in latest Case-Shiller report

Case-Shiller released its home price index for March 2012 today. The home price index for the Denver area rose 1.5 percent percent from February to March, and rose 2.6 percent, year over year, from March 2011 to March 2012.  The year-over-year increase in March was the third year-over-year increase in a row for Denver, and was the largest increase in 22 months . The first graph shows the index values since 2001:

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

“While there has been improvement in some regions, housing prices have not turned,” says David M. Blitzer, Chairman of the Index Committee at S&P Indices. “This month’s report saw all three composites and five cities hit new lows. However, with last month’s report nine cities hit new lows. Further, about half as many cities, seven, experienced falling prices this month compared to 16 last time.

In year-over-year comparisons for March, Atlanta showed the largest drop, with a decline of 17.7 percent, while the index in Las Vegas fell 7.5 percent. Year over year, home price indices fell in 13 of the 20 cities included in the study.Denver was among the seven cities reporting increases, and had the third-largest increase of the twenty cities. Only Phoenix and Minneapolis reported larger year-over-year increases in the home price index than Denver.

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.

The 20-city composite is down 35 percent since it peaked in July 2006, but the Denver index is down only 11.8 percent from its August 2006 peak.

Although the Denver index showed some significant growth in March compared to March 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 March was negative with a decrease of 2.6 percent while Denver reported an increase of 2.6 percent, and also increased  for the thirdmonth in a row. In the 20-city index, the year-over-year change has been negative for the past 18 months.

The last chart provides a closer look at year-over-year changes in the Denver index. Note that 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. Home prices showed increases in Denver compared to 2011 during the first quarter of 2012, and March's relatively large increase of 2.6 percent suggests continued strength in the demand for home purchases, at least in the short term .