Monday, August 4, 2008

Denver Market Poised for a Turn Around

By John Rebchook

Originally published 08:53 a.m., July 29, 2008
Updated 09:33 p.m., July 29, 2008

Denver-area housing is bucking a national trend, showing a price decline of only 4.8 percent in May from May 2007, according to the S&P/Case-Shiller Home Price index released on Tuesday.

During the same period, housing prices in the 20 metropolitan areas tracked in the report declined by a record 15.8 percent.

Only two cities, Dallas and Charlotte, N.C., showed smaller drops than Denver. Charlotte prices fell by 0.2 percent and Dallas by 3.1 percent.

From April to May, Denver home prices rose 1 percent, matching increases in Boston, Charlotte and Dallas.

Mike Cox, of RE/MAX Professionals, said the Case-Shiller report confirms his belief that Denver's housing market will recover faster than formerly hot cities such as Las Vegas, Miami, Phoenix and areas in California.

"You kind of don't know when you hit bottom until you have started to come out of it," Cox said. "In one sentence, I think what is going on in Denver is that buyer confidence is starting to return. And when you take fear out of the equation, things get better."

He said he thinks Denver home prices will be higher in a year.

David Binkowski, owner of Real Estate of the Rockies, said the report shows that "Denver is sort of ahead of the curve. I think things are stabilizing."

He said sales at his company are up 33 percent from a year ago and he is opening new offices.

"This has been our best year ever," he said.

Lou Barnes, principal of Boulder West Financial, and a longtime critic of the Case-Shiller report, said the overall Denver-area market is flat, with pockets of strength and areas where home prices are plummeting.

"The total number of home resales have fallen nationally from about 7 million in their peak in 2006 to about 4.5 million today," Barnes said.

"And the total number of foreclosures have gone from less than 500,000 to as many as 1.5 million this year," Barnes said. "We know that foreclosures trade at a discount, so that is simply a matter of arithmetic that with fewer sales, the foreclosures are going to magnify a price decline when figuring out averages."

He said Office of Federal Housing Enterprise Oversight data, a government report that includes refinances, is a better indicator of the direction of the housing market. It shows a flat market locally.

However, Barnes said it is far from certain that overall Denver- area prices will be higher a year from now.

"There is so much riding on the national economy that it is hard to figure out," he said.

Liz's Word

Consumer confidence in the market continues to ebb and flow due to all the negative national press. The truth of the matter is that the Denver market continues to hold steady on pricing. Some properties, if priced right and exceptional in finishes-will go under contract in 1 day and to multiple offers. This particular situation just happened to my client and I while submitting a contract on a home in Berkley. We wrote an offer on the house the first day it was on the market and we were one of 4 offers. Unfortunatley we lost out to a cash offer- fortunately, that deal fell through and we resubmitted our full price offer. Thus successfully putting the house under contract. The real twist to this story comes on appraisal deadline. The value of the home was not of question to my Buyer and I as we had seen over 20 properties in the same price range and were well versed on the comparable sales. However, due to the ultra-conservative direction that the banks have currently taken, the appraiser valued the home at 15k under our contract price. Needless to say, we were all astounded. The good news is that we re-negotiated our price and my Buyer was able to get a substantial discount. Banks are having appraisers only go back 3 months for comparable sales-and it seems as though, they are also having them use the lowest comparable sales rather than the highest. Interesting times indeed. The moral of this story. . . .it is an excellent time to buy. Enjoy the following article on the current state of our Denver market.