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You can fly from Denver to either Las Vegas or Phoenix in less than two hours, and be in metropolitan areas where the housing bubble didn’t just burst, but exploded.
Although Denver, like the rest of the county, has yet to fully recover from the first nationwide housing downturn since the Great Depression, a national report released on Tuesday illustrates that Denver has not been hammered as hard as many other cities once flying high on home prices in the stratosphere, before plummeting to earth equally as fast and hard.
Denver is only one of two of the 20 metropolitan statistical areas tracked by the closely watched S&P/Case-Shiller report that is down less than 10 percent from its peak.
Denver is down 9.8 percent from its peak in August 2006, according to a year-end analysis released by Case-Shiller. Dallas is the other city, down 8.2 percent from its peak.
It was a different case in Las Vegas or Phoenix, down 57 and 53.4 percent, respectively, from their peaks.
But before they crashed, they experienced huge gains in prices. In 2004, Las Vegas experienced its peak annual growth rate of 53.2 percent, while Phoenix was up 53.2 percent.
Denver never had those kinds of run-ups.
Denver’s drop painful, but not a bubble bursting
“A 10 percent drop is not a bubble,” said Chris Mygatt, president of Coldwell Banker Colorado.
“I think it is a great observation that if you look at Phoenix and Las Vegas, they are both in the same time window from Denver, and both of them are some of the hardest hit home markets in the country,” Mygatt said. “Yet, here we are in Denver, where we never had that big bubble or that big bubble exploding.
Mygatt said it is exiting to have a national spotlight on the relative strength of Denver’s housing market. “I think it is really thrilling to be recognized by Case-Shiller in that way.”
Independent broker Gary Bauer said that the Case-Shiller analysis backs up what he and many other Realtors have been saying since the housing crisis first became apparent more than three years ago.
Denver avoided peaks and valleys
“Without sounding like a broken record, but in the Denver metroplex, we have never had the peaks and valleys like some other markets,” Bauer said. “Overall, we have had more of a consistent market. Denver is not like it was in the ’80s, when our economy was tied to one industry, oil. Back then, it was like the 16th Street Mall was booming on Thursday and when the energy market collapsed it was dead on Saturday.”
Now, he said, Denver’s economy is more diversified, and is a “destination” city for a wide-variety of professionals looking for good jobs in an area with a high quality of life.
“Yes, we are still going to have our ups and downs, but, again, not the peaks and valleys,” in the housing market, he said.
Jason Miller, owner of Milan Realty, agreed that Denver never saw the “run up in prices in Vegas and Phoenix, so not seeing large price declines is not surprising.”
However, he said when you look at the price appreciation in the 10-city Case-Shiller index from 2000, Denver ranks fifth. Its long-term appreciation rate is 26 percent, less than half of the 10-city MSA appreciation rate of 59 percent.
Denver’s relative performance from its peak was not the only analysis Case-Shiller used in regards to Denver.nCase-Shiller also broke the Denver market into price tiers by dividing recent sale prices into thirds.
Low-priced homes fell the most
It found from the peak, low-tiered homes – houses priced in the bottom third – lost 14.4 percent of their value. By contrast, the high-tiered market is down 10.3 percent and the aggregate market fell by 9.8 percent.
The timing of the report and Case-Shiller’s methodology likely resulted in the high-end homes faring the best, Miller theorized. The most recent Case-Shiller report was for October.
Old data
“Case-Shiller’s data is very old,” Miller said. “Their methodology takes a three-month average for the data in their report. So, the October release had homes that closed in August, September and October.” And those homes likely went under contract in the late spring and early summer, he said.
“As you know, the sales of high- end homes picked up in the late spring and early summer, so Case- Shiller may not have had as many (closings) to analyze,” Miller said. He noted that Edie Marks, a broker at the Kentwood Co., recently told InsideRealEstate News that high-end homes that are selling have very large price reductions and we are coming off a very low base of sales of high-end sales in 2009.
“Let’s wait a few more quarters, and we should see high-end homes surpassing the low- and mid-end,” Miller said.
But Mygatt, of Coldwell Banker, thinks the Case-Shiller analysis rings true.
High-end held values longest
“If you look at the high-end market, it was the last to fall in Denver,” Mygatt said. Mygatt added that sellers last year were finally willing to sell homes have lowered prices to make them more attractive to buyers, spurring sales of homes priced at $1 million or more.
“Quite frankly, if you look at the past year, and I do not have the stats in front of me, but I think that were only two or so months in 2010 that the high-end market did not out-perform the same month in 2009,” Mygatt said. “Yes, the market did drop off significantly last year, but the market also held on to its value longer the market as a whole.”
Bauer said that Case-Shiller’s take on the top tiered homes makes sense, because after the Denver-area market peaked in 2006, it was the low-end market that first suffered from foreclosures and took huge hits. Luxury homes only recently have suffered a similar fate.
If Case-Shiller had been looking at a year-over-year change, the luxury market may have taken the larger percentage loss, he said. That’s because investors have driven up the prices of homes in the bottom tier, while prices of luxury homes are being slashed to sell.
