Home values tick up

Metro area's 3.5% increase far behind nation's 10.3% jump

John Rebchook, Rocky Mountain News

Tuesday, May 16, 2006

Prices for homes sold by Realtors in the Denver area rose by 3.5 percent in the first quarter compared with the same period in 2005 - about a third of the national increase of 10.3 percent, according to a National Association of Realtors' report released on Monday.

The increase is consistent with monthly reports from the local Metrolist.

In year-over-year appreciation, the National Association of Realtors data ranks the Denver area No. 105 out of 150 markets it tracks.

The Denver area, with a median home price of $244,200, ranked No. 40 overall. Boulder County, with a median price of $360,400, ranked No. 21. Colorado Springs, with a median price of $209,400, ranked No. 54.

The overall median price for a home in the U.S. was $217,900. The San Jose, Calif., metro area had the highest prices, with a median of $746,800.

Peter Doty, who owns a Metro Broker office, said the 3.5 percent overall increase in the Denver area is consistent with what he has been seeing.

But he thinks better times are ahead for the metro area, while he thinks previously hot housing markets in other parts of the country are in for a big fall in prices.

"We're in the middle of an economic upturn," Doty said. "It is very similar to the market from 1976 to 1978. Suddenly, the oil and gas business was just here and we became a regional capital for oil and gas. That can happen in a very short period of time. For sellers today, it seems like that can never happen, but it will."

Doty said he expects overall housing appreciation in the Denver area to be in the 5 percent to 8 percent range this year.

But Michael Kone, a Boulder economist and principal of Housingmetrics Inc., said he thinks the Realtor association figures overstate the appreciation, even at a meager 3.5 percent. He said the figures likely are skewed by the mix of homes sold.

Kone said his research shows the market was flat, with the low-end housing market struggling but with quite a bit of strength at the upper end.

Part of that can be attributed to demographics, as there are fewer first-time home buyers in the market than in previous years, he said.

Low-end housing prices are under even more pressure because of the rising foreclosure rate, he said.

"It's not just higher interest rates on ARMs," he said. "It's all the credit-card debt, which also is adjusting upward. So it's a double whammy. Personal bankruptcies also are up in Colorado."

Kone also is skeptical that overall housing prices will rise by much because home builders are still constructing so many homes. By contrast, the housing market showed strong appreciation in the late 1990s because so many people were coming to the metro area for high-paying high-tech jobs, and builders couldn't keep pace with the growing population, he said.

Economist Tucker Hart Adams said that the appreciation figures show that the Denver-area housing market is still softer than much of the country.

Adams said that when she speaks to groups of Realtors, many of them tell her privately that the market is mired in a slump. Prices need to be cut for sales and it takes longer to close a deal, she said.

"And for the first time (in this cycle) they tell me that lenders are finally starting to lower the prices on foreclosed homes," she said.

However, the Denver-area market is not in danger of crashing, she said.

"I think 2 percent or 3 percent appreciation is healthy," Adams said. "It means we don't have as far to fall as other parts of the country. That doesn't mean our prices still won't fall. It's just we won't see the huge drops that we could see elsewhere."

rebchookj@RockyMountainNews.com or 303-892-5207