Denver-area home prices rose 8.8 percent in August, the third best market of the 20 cities tracked in the closely watched Case-Shiller Index, which was released today.
Denver has been No. 3 on the S&P CoreLogic Case-Shiller Indices every month this year since February.
Only Portland and Seattle bested Denver’s 8.8 percent increase, with their markets rising 11.7 percent and 11.4 percent, respectively.
The 8.8 percent gain marks the first time since January 2015 that Denver home prices shown a year-over-year increase of less than 9 percent.
In January, Denver-area home prices rose by 10.2 percent, the most this year. However, that put Denver in fourth place on the Case-Shiller index.
However, no one is complaining about Denver’s national ranking.
Indeed, home prices in Denver have risen on a year-over-year basis every month since January 2012.
“Again, No. 3 out of the top 20 MSAs is another standout, as far as where we are in the national ranking,” said Peter Niederman, CEO of Kentwood Real Estate.
The 8.8 percent gain is “nothing short of phenomenal,” Niederman added.
A lack of supply has driven up home prices, both nationally and in Denver, he said.
Denver home prices out-pace inflation
The average increase for all homes tracked by Case-Shiller was 5.1 percent, more than double the inflation rate.
“In Denver, there is a huge shortage of homes relative to new household formations,” Niederman said.
That is more telling metric than the more common months of inventory, which in Denver is less than two months, he noted.
One area where Denver is bucking the trend is historically strong luxury home sales, he said.
Niederman recently returned from a Realty Alliance conference in Miami, where real estate executives from the East and West Coasts, as well as from the Southeast, have seen a slowing of luxury homes.
Denver, meanwhile, has been experiencing record luxury sales for much of this year.
“That has to be because of the positive net migration to Denver and because of relocations from other state,” Niederman said.
“Most recently, Toastmasters is relocating to Denver from California, which will mean another 100 or more people relocating to Denver,” he said.
His biggest concern remains that Denver will be tagged as an unaffordable market, which could mean that companies will not be as eager to move here.
Sustainable appreciation welcomed
Chris Mygatt, president of Coldwell Banker Residential Brokerage in Colorado, was glad that appreciation has slowed a bit in Denver.
“I love the 8s and I loves the 7s, as they are sustainable,” Mygatt said.
In fact, he would have no problem if going forward home appreciation in Denver fell from 8.8 percent.
“We don’t want markets like Las Vegas, Phoenix or in Florida, which saw these huge spikes followed by massive downturns,” Mygatt said.
At the same time, the Denver-area’s 8.8 percent gain is the latest reminder that owning a home is a great way to build wealth.
“Colorado homeowners have built significant wealth over the decades,” Mygatt said.
The 8.8 percent gain is not only good news for local homeowners, but sends an important message to Millennials, he said.
“This demonstrates that homeownership is an important part of Millennial’s future,” Mygatt said.
For those who are priced out of the core Denver-area housing, he suggested that they look at markets such as Mead in Weld County, where prices are rising, but less expensive.
Independent broker Gary Bauer said that 8.8 percent and third place for Denver “is just amazing.”
He said Denver has experienced a strong fall market, which is primarily being slowed by a shortage of appraisers.
“This will be another record year,” Bauer said.
He said it is good news that Denver has consistently been ranked in the top five markets in the country.
“But I am grateful that we are No. 3 and not No. 1,” he said.
National market overview
Meanwhile, the national housing market remains in good shape.
“Supported by continued moderate economic growth, home prices extended recent gains,” said David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices.
“All 20 cities saw prices higher than a year earlier with 10 enjoying larger annual gains than last month,” Blitzer continued.
“The seasonally adjusted month-over-month data showed that home prices in 14 cities were higher in August than in July,” he said
Blitzer noted that other housing data, such as sales of existing single family homes, measures of housing affordability, and permits for new construction, “also point to a reasonably healthy housing market.
“With the national home price index almost surpassing the peak set 10 years ago, one question is how the housing recovery compares with the stock market recovery,” according to Blitzer.
Since the last recession ended in June 2009, the stock market as measured by the S&P 500 rose 136 percent to the end of August while home prices are up 23 percent. Home prices, however, did not reach bottom until February 2012, almost three years later.
Home, prices, nationally, he noted, are up 38 percent, if you use February 2012 as your starting point.
Stock prices are up 59 percent during the same period.
Denver-area home prices, however, rose 51.9 percent during that period, almost as much as stocks.
“While the stock market recovery has been greater than the rebound in home prices, the value of Americans’ homes at about $22.3 trillion is slightly larger than the value of stocks and mutual funds at $21.2 trillion,” Blitzer pointed out.
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