Shake It Over to Salt in Boulder for Father’s Day

Highlights:

• Case-Shiller reports a 9.9% YOY gain in Denver home prices.
• Last time Denver gained more on an annual basis was in August 2001.
• Experts would like to see appreciation slow, but don’t fear a bubble.

 The Denver-area housing market showed a 9.9 percent year-over-year gain in February, according to the closely watched Case-Shiller report released today.

That is the best yearly gain in almost a dozen years, according to the S&P/Case-Shiller Home Price Indices.

The last time the yearly gain was at 9.9 percent was in September 2001and the last time was higher was in August 2001, when it stood at 10.7 percent, according to Case-Shiller, which recently was purchased by Core Logic.

” This home recently was listed for just under $400,000 in a market that is starving for supply. under $400,000 in a maket that is starving for supply.

Overall, Denver ranked in the middle of the 20 metropolitan statistical areas tracked by Case-Shiller. It also marked 15 consecutive months of improving year-over-year gains for Denver.

“We just missed cracking 10 percent and hitting double digit appreciation,” said Lane Hornung, founder and CEO of 8z Real Estate.. “Inventory levels have only grown tighter since February, so I would expect to see similar appreciation rates in the coming months when Case Shiller numbers for March and April are published.

He said  many consumers are finally waking from their “real estate slumber,” which is good news for the market.

“They are realizing that home prices are up, their home may be worth more than they thought, and now may be a good time to sell and take advantage of low interest rates on the buy side,” Hornung said.

The average for all 20 MSAs was 9.3 percent and it was 8.6 percent for 10 of the MSAs, which includes Denver. Nationally, that was the best showing in almost seven years and the strongest the market has been since the housing crash.

In January, the year-over-year appreciation was 9.2 percent.

Prices in the Denver area now are near where they stood in the fall of 2007, before the national real estate collapse.

“These are pretty nice numbers,” said Peter Niederman, CEO of Kentwood Real Estate.

“It is interesting that we have not seen this type of year-over-year increases since 2001,” Niederman said.

“We have incrementally outperformed 10 of the 20 market and that is OK.”

If anything, Niederman said he would like to see the appreciation slow.

“Having almost a 10 percent, year-over-year increase is not sustainable,” Niederman said.

“It is good, short-term, in that some people who had negative equity now will be able to sell their homes,”

he said.

“Long-term, it is not sustainable. I would rather see a 4 percent to 6 percent increase.”

Sonja Leonard Leonard, owner of Leonard Leonard & Associates, said consumers are paying too much for homes.

“It is shocking,” Leonard said.

“I have been doing this for 33 years and I know when people are overpaying,” she said. “They are really overpaying right now.”

She recently listed a home in the Capitol Hill area. The owner wanted to list it for $385,000, but Leonard decided to push the market and list it for $419,000.

“We received over 10 offers in excess of $440,000,” Leonard said.

Leonard said group psychology appears to be at work.

“People are such sheep,” Leonard said. “When everybody else is buying, they figure they need to buy. When everyone is afraid to buy, people are too frightened to buy.”

Historically low interest rates, coupled with strong demand and the lowest inventory levels on record are pushing up prices, according to a number of people who observe the market closely.

“We know these interest rates aren’t going to stay this low forever and that is creating a sense of urgency,” Niederman said.

However, he said the inventory, or the lack of it, may not be as big of a problem as would appear at first.

“Yes, Realtors would like to see more homes on the market,” Niederman said.

“However, part of this is being masked by the sales velocity,” he said. “We probably have as many active listings coming on the market as ever, but they are selling very quickly. Our sales velocity is absorbing the new homes coming on the market very quickly.”

Prospective buyers are frustrated by the lack of choices, said Chris Mygatt, president of Coldwell Banker Residential in Colorado.

“Buyers are feeling frantic and like they are pushed into the market,” Mygatt said. “It is like you have got to make a decision soon, or the market will leave you behind.”

To a certain extent that is true, as he said people who wait may be forced to pay more down the line. At the same time, Mygatt doesn’t think Denver is in danger of dealing with a bubble market.

“No, because we are still not at the level of where we would be if we had seen 3 percent or 4 percent annual appreciation over the past five years,” Mygatt said.

Other parts of the country, however, are in bubble territory, Mygatt  said.

For example, Phoenix saw a 23 percent year-over-year increase and Las Vegas experienced a 17.6 percent jump in annual prices.

“Will they never learn? They had these huge increases, followed by these huge drops and these huge increases,” Mygatt said.

“The Case-Shiller report shows that Denver is not one of these glitzy, trendy markets that experiences huge swings, up and down,” Mygatt said.

“Denver is much more of steady, sustainable market,” he said.