Friday, February 1, 2013

Case-Shiller: Denver metro home price index up 7.8 percent, hits 5-year high

Case-Shiller released its home price index for November 2012 yesterday. The home price index for the Denver area rose 0.4 percent percent from October to November, and rose 7.8 percent, year over year, from November 2011 to November 2012.  The year-over-year increase in November was the eleventh year-over-year increase in a row for Denver, and was the largest increase since November 2001, when the year-over-year growth rate was 7.6 percent.  The first graph shows the index values since 2001. The index value is at the highest value seen since October 2007.

 According to S and P's press release, home prices nationwide continued to show some signs of growth:
“The November monthly figures were stronger than October, with 10 cities seeing rising prices versus seven  the month before.” says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices.  “Phoenix and San Francisco were both up 1.4% in November followed by Minneapolis up 1.0%. On the down  side, Chicago was again amongst the weakest with a drop of 1.3% for November.
In year-over-year comparisons for November, one out of 20 cities showed year-over-year declines in the home price index.  The index for New York fell 1.2 percent. Denver was among the nineteen cities reporting increases, and had the eighth-largest increase of the twenty cities. The largest increases were in Phoenix and San Francisco with year over year increases of 22.8 percent and 12.7 percent, respectively.

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.

The 20-city composite is down 29 percent since it peaked in July 2006, but the Denver index is down only 4.1 percent from its August 2006 peak.

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 November was positive for the sixth month in a row.

In short: Denver metro home prices have shown a stronger growth trend in recent months than the 20-city composite.

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. We must go back to November 2001 to find a larger year-over-year growth rate.