Tuesday, July 31, 2012

Case:Shiller: Denver home prices up 3.7 percent in May

Case-Shiller released its home price index for May 2012 today. The home price index for the Denver area rose 2.1 percent percent from April to May, and rose 3.7 percent, year over year, from May 2011 to May 2012.  The year-over-year increase in May was the fifth 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. The index value is at the highest value seen since August 2010.

According to S&P's press release, home prices nationwide continued to show some signs of growth:
“With May’s data, we saw a continuing trend of rising home prices for the spring,” says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “On a monthly basis, all 20 cities and both Composites posted positive returns and 17 of those cities saw those rates of change increase compared to what was observed for April. Seventeen of the 20 cities and both Composites also saw improved annual rates of return. We have observed two consecutive months of increasing home prices and overall improvements in monthly and annual returns; however, we need to remember that spring and early summer are seasonally strong buying months so this trend must continue throughout the summer and into the fall.
In year-over-year comparisons for March, Atlanta showed the largest drop, with a decline of 14.5 percent, while the index in Las Vegas fell 3.2 percent. Year over year, home price indices fell in 8 of the 20 cities included in the study. Denver was among the twelve cities reporting increases, and had the fourth-largest increase of the twenty cities. Only Dallas, 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 32 percent since it peaked in July 2006, but the Denver index is down only 8 percent from its August 2006 peak.

Although the Denver index showed some significant growth in May compared to May of last year, the Denver index during May was at levels comparable to those found during 2004.

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 five month in a row. In the 20-city index, the year-over-year change has been negative for the past 20 months.

In short: Denver metro home prices are increasing while the national index continues to fall in year-over-year comparisons. 

The last chart provides a closer look at year-over-year changes in the Denver index. The index went negative as the economy began to slow in 2007 and remained negative until this year with the exception of the period in which the homebuyer tax credit pushed up prices temporarily. Recent home price growth is accelerating as inventory declines, household formation continues, and rental housing continues to become more expensive.