How is the Denver Real Estate Market?

A client emailed me today to ask for an update on the Denver Real Estate Market (specifically on Stapleton) in light of a CNN.com report predicting "another 8% decline" in U.S. home prices.

Okay, so I tend to get worked up about national media reports that try to paint every real estate market with a single broad brush. There is no such thing as a "national" real estate market - it is all local, and in many cases real estate markets change at a micro (neighborhood) level. If you want to buy a Shelby Cobra, there is (for the most part) a national market - if you find the car you want in Boston you can load it on a trailer and bring it home to Denver. This is not the same for housing. Yes, you can load a house on a trailer and move it across the country, but a lot of other factors come into play when you do so!

Since I usually trust my own instincts and experiences over media reports from somewhere else, I thought I would do a little digging. I checked out the CNN.com story and the first thing that struck me was that for an article titled, Home prices expected to slide another 8%," it was interesting that they would use a graphic which shows home prices rising overall for 2010!

The CNN article (like most real estate "market" reports) relies on the Case Shiller index for its stats. There are a lot of people in real estate who question the validity of the conclusions from the Case-Shiller index. In some cases these are people using residential stats to judge the condo market in NYC. In others it is the result of the broad "markets" that the Index reports on, or the mix of markets that Case Shiller uses in it's top 20. For "Denver," Case Shiller defines uses the US Census’ “Denver-Aurora-Broomfield MSA” which includes the entire City and County of Denver, along with portions of 9 other counties. According to the Census Bureau, in 2007 just over half of everyone in Colorado lived in this MSA and less than 25% of the people in the MSA actually lived in Denver.

The Index also tends to overplay movement in the market, up or down, based on results in certain metropolitan areas. When the market was booming in SoCal, Las Vegas, Phoenix, etc., I had clients asking why Denver wasn’t following suit. Today the results in the Index tend to overplay the reality in many areas. According to Case Shiller’s report, Denver home prices overall are down 1.2% from August 2009 to August 2010.

The next question from my client relied on RealtyTrac's website, and its "statistics" ion foreclosures. Just as I make money when people buy and sell homes (so I may tend to be more optimistic), RealtyTrac makes its money selling subscriptions to users so that folks can search for foreclosures. According to their website, there are 4,371 properties in the 80238 zip code, which sounds about right. Then their site says there are 779 “Bank Owned” properties. When you click on the details, however, only 25 are in the 80238 zip code. Then looking at those 25 properties, I know of 6 that are commercial and 8 more are more than a year old. Based on information from the Stapleton MCA, there have been, "a handfull... maybe 6 or 7 foreclosures" in Stapleton so far this year. While this is a huge number if you are one of the affected homeowners, overall it is a miniscule percentage of the 4,000+ homes in the community.

Finally I also looked for stats in Metrolist (the Denver MLS), to make sure I am not off base. In 2009, there were 158 residential homes sold in Stapleton between Jan 1 and Nov 1. This probably doesn’t count new construction very well (they rarely report to MLS), but should be pretty good for detached resales. For the same period in 2010, there have been 168 sales. In 2009, the avg days on market for sold homes was 121 days; for 2010 it is 119. In 2009 the avg sold price per sq ft was $208; in 2010 it is $202. Avg price per finished square foot (which takes into account finished basements) is down from $188 to $185. All told, there were $73.1 million in resales in 2009 from Jan – Nov 1 and $71.7 million so far in 2010. All in all, that’s a pretty stable market here.