Tuesday, June 26, 2012

Case-Shiller: Metro Denver home price growth accelerates

Case-Shiller released its home price index for April 2012 today. The home price index for the Denver area rose 1.7 percent percent from March to April, and rose 2.8 percent, year over year, from April 2011 to April 2012.  The year-over-year increase in April was the fourth year-over-year increase in a row for Denver, and was the largest increase in 23 months . The first graph shows the index values since 2001:

According to S&P's press release, home prices nationwide started to show some signs of growth:

“With April 2012 data, we finally saw some rising home prices,” says David M. Blitzer, Chairman of the Index Committee at S&P Indices. “On a monthly basis, 19 of the 20 MSAs and both Composites rose in April over March. Detroit was the only city that saw prices fall, down 3.6%. In addition, 18 of the 20 MSAs and both Composites saw better annual rates of return. It has been a long time since we enjoyed such broadbased gains. While one month does not make a trend, particularly during seasonally strong buying months, the combination of rising positive monthly index levels and improving annual returns is a good sign."

In year-over-year comparisons for March, Atlanta showed the largest drop, with a decline of 17 percent, while the index in Las Vegas fell 5.8 percent. Year over year, home price indices fell in 10 of the 20 cities included in the study. Denver was among the ten cities reporting increases, and had the fourth-largest increase of the twenty cities. Only Phoenix, Miami 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 34 percent since it peaked in July 2006, but the Denver index is down only 10 percent from its August 2006 peak.

Although the Denver index showed some significant growth in April compared to April of last year, the Denver index during April was at levels comparable to those found during 2003.

The third chart compares year-over-year changes in the Denver area index and in the 20-city composite. Overall, the index has been less volatile in Denver than has been the case for the 20-city composite. The year-over-year change in the 20-city composite during April was again negative with a decrease of 1.9 percent while Denver reported an increase of 2.8 percent, and also increased  for the fourth month in a row. In the 20-city index, the year-over-year change has been negative for the past 19 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 April's relatively large increase of 2.8 percent suggests continued strength in the demand for home purchases, at least in the short term .