Getting your player ready...
The Denver-area housing market dodged the dreaded double dip in housing prices in March, but only by a hair.
The closely followed S&P/Case-Shiller Home Price Indices released today shows that the Denver-area housing market missed re-visiting the low average price set in February 2009, by a mere 0.28 percent. Twelve of the 20 metropolitan statistical areas tracked by Case-Shiller set new lows during in March since the real estate crash swept the country, the first nationwide housing collapse since the Great Depression.
“We just barely escaped the double dip,” noted Lane Hornung, president, CEO and co-founder of 8z Real Estate. “We’ll see next month if the April index dips further, and we officially join the ranks of the double dippers. It will be close either way.”
Of course, missing a double dip by such a small margin, isn’t that relevant, mathematically.
Rounding error
“When you’re off by only 0.3 percent, it is really kind of splitting hairs,” said Jeff Thredgold, corporate economist for Vectra Bank Colorado. “There’s an old saying that economist use when we are forecasting a 2.5 percent change as opposed to a 2.6 percent change, we are doing so to show that we have a sense of humor.”
Mike Rinner, of the Genesis Group, agrees that being so close to double-dip territory is no reason to crack open the bubbly. “It’s a dubious distinction,” Rinner said. “It’s a little premature to be celebrating when you miss a double dip by such a small amount.”
Still, not being firmly planted in double-dip territory, at least not yet, provides a psychological benefit.
“I think it is really positive,” said Gary Bauer, an independent Realtor who analyzes Metrolist data on a monthly basis. “I would be really surprised if we hit the double dip. There is just a good, overall feeling out there. Brokers are having a lot of showings and a lot of consumers are interested in putting homes under contract to take advantage of mortgage rates that are still near their historic lows. Paperwork at a closing is still a nightmare, but some of the onerous new regulations that people have been talking about – such as requiring a 5 percent down payment for a FHA-loon or 20 percent for a traditional, conventional-loan, have not taken place.”
Hornung: Market stable
While the double dip pronouncement may get the lion’s share of media attention, it doesn’t really describe the Front Range housing market, said Hornung, of 8z Real Estate, which is a sponsor of InsideRealEstateNews.
“Beyond the headline grabbing pronouncements of a nationwide double dip, the Front Range market is one that I would characterize as stable,” Hornung said. “Year-over- year sales volumes are down compared to last year’s tax credit market, but sales are steady and certainly not non-existent as some would have you believe. Inventory levels are down considerably, which is putting some upward pressure on prices. The sky is not falling. The market is just grinding along, bouncing along the bottom as it has been for over two years now.”
Peter Niederman, the head of the Kentwood Co., said that “without a doubt,” it is good news that Denver escaped being ranked with the double-dip cities, by no matter how small of a margin. Still, the importance of Case-Shiller is to see how Denver fares against 19 other major markets across the country, he said.
“I know I sound like a broken record, but the Case-Shiller data is already 60 days old,” Niederman said. “We know how Denver did in March, compared with March 2010. We did Ok, considering that the federal tax credits were in place a year earlier, which required you to have your house under contract by April 30, 2010.”
Niederman thinks 2011 will be better than 2010
Niederman is sticking by his earlier projection that the overall Denver housing market will be up 3 percent to 5 percent in 2011, in the number of sales and sales dollar volume, compared with 2010. Bauer said he expects the market to be up “less than 1 percent,” which he said is more optimistic than he was earlier in the year.
Niederman said that buyers were motivated by the tax credits in the first four months of 2010, making for a strong first quarter. In the third quarter of 2010, the market experienced a severe drop, he said, but he thinks this year’s third quarter will “return more to the seasonal bell curve. July will really be the first month that I feel will not have some “noise,” as far as a year-over-year comparison. Right now, I’d say our housing market is moderate. It’s nothing to beat our chest about, but it’s nothing to cry about, either.”
March did market nine consecutive months of year-over-year declines, according to Case-Shiller. “That is not unexpected,” said Rinner, of the Genesis Group. And the 3.8 percent year-over-year drop, was slightly worse than the 3.6 percent, year-over-year drop for the 20 cities in the composite. On a year-over-year basis, only Washington, D.C. was in positive territory in March, showing a 4.3 percent gain.
Denver’s market ranked No. 7 in March, of the 20 cities in the index, with 13 showing larger drops, on a year-over-year basis.. From February to March, Denver’s housing market showed a 0.6 percent decline, ranking it No. 6. That also was slightly better than then overall 0.8 percent month-to-month decline for the 20 cities.
“No relief in sight.”
“This month’s report is marked by the confirmation of a double-dip in home prices across much of the nation,” said David M. Blitzer, Chairman of the Index Committee at S&P Indices. “The National Index, the 20-City Composite and 12 MSAs all hit new lows with data reported through March 2011. The National Index fell 4.2 percent over the first quarter alone, and is down 5.1 percent compared to its year-ago level. Home prices continue on their downward spiral with no relief in sight. “Since December 2010, we have found an increasing number of markets posting new lows. In March 2011, 12 cities – Atlanta, Charlotte, Chicago, Cleveland, Detroit, Las Vegas, Miami, Minneapolis, New York, Phoenix, Portland and Tampa – fell to their lowest levels as measured by the current housing cycle. Washington D.C. was the only MSA displaying positive trends with an annual growth rate of 4.3 percent and a 1.1 percent increase from its February level.”
He agreed with local observers that last year tax credits were the driving force in early 2010.
“The rebound in prices seen in 2009 and 2010 was largely due to the first-time home buyers tax credit,” Blitzer said. “Excluding the results of that policy, there has been no recovery or even stabilization in home prices during or after the recent recession. Further, while last year saw signs of an economic recovery, the most recent data do not point to renewed gains.
“Looking deeper into the monthly data, 18 MSAs and both Composites were down in March over February. The only two which weren’t, are Washington DC, up 1.1 percent, and Seattle, up 0.1 percent. Atlanta, Cleveland, Detroit and Las Vegas are the markets where average home prices are now below their January 2000 levels. With a March index level of 100.27, Phoenix is not far off.”
