Home prices in Denver and Aurora appreciated at a meager 1.3 percent rate in the fourth quarter of 2006 – compared with the same period in 2005 – as the metro housing market struggled to find a floor, according to a home-price index released Thursday by the federal government.
That’s the slowest appreciation rate for Colorado’s most populous residential area since the third quarter of 1990, when the country was mired in a recession, according to the Office of Federal Housing Enterprise Oversight.
“People who buy a house thinking ‘the market will take care of me’ – those days are gone,” said John Sullivan, a broker and co-owner of Re/Max Cherry Creek.
Over the past five years, average home values in the Denver-Aurora area are up 16.8 percent, compared with a 55.2 percent gain nationally over the same period, according to the OFHEO index.
Subtract a modest 9 percent inflation rate over the period and a 6 percent real- estate commission from any housing gain, and a typical seller who bought five years ago would turn little profit.
“The Colorado economy is in great shape, but the housing market is just flat,” said Lou Barnes, a mortgage banker in Boulder.
The home-price gain in the fourth quarter was below the meager gains recorded in 2003, when the state was reeling from the loss of tens of thousands of jobs following the tech and telecom bust.
Any evidence of strength in housing will trigger a surge in new construction in Adams, Arapahoe, Weld and Larimer counties, Barnes said.
He suggests the easy availability of land for development will cap home-price gains along the northern Front Range for a long time.
Home prices appreciated at a 3.3 percent pace for the state as a whole in the fourth quarter, ranking 43rd among all states, according to OFHEO.
Variations within Colorado were wide.
Greeley and Boulder showed annual gains below 2 percent. Fort Collins-Loveland had the weakest gain of any major metro area in the state, 0.85 percent.
Colorado Springs and Pueblo experienced price gains of 4.7 percent and 5.35 percent.
In the Grand Junction area, an influx of energy workers and continued interest in the area as a retirement haven have resulted in a housing shortage, said Kathi Williams, director of the Colorado Division of Housing.
Its housing market posted a home-price gain of 13.3 percent, comparable to those in Utah, Wyoming and Idaho, which led the country with appreciation rates of 14 percent or higher.
The OFHEO index looks at the sale or refinancing of a large block of homes across time, tracking more than 32 million transactions over the past 32 years.
It is considered a more precise measure of home values than Real tor-generated resale numbers, which calculate values based on the mix of homes sold in a given period.
Staff writer Aldo Svaldi can be reached at 303-954-1410 or asvaldi@denverpost.com.
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1.32%
Appreciation of Denver-Aurora home prices for the fourth quarter 2006
16.75%
Appreciation rate in the Denver-Aurora market over past five years
