Interesting post this morning on John Rebchook's real estate blog site, but it validates a theme that's been running through my posts for the last 18 months. The high end of the market in Denver (above $750k in Rebchook's article, above $600k in my world view) is crashing, while the low end (below $250k) is surging.
Rebchook's article, like my post on December 30, points out that while the Case-Shiller national index ranks Denver as the top performing market in the country (based on the index's projection of a year-over-year value loss of 0.1%), the reality is that many sub-$200k single family homes have seen increases in value of up to 10% (or more) in the past year. It's only the dismal performance at the higher price points which drags the overall market assessment down.
Some argue that the tax credits are the primary driver in the entry-level demand, but I don't think it's that simple. It's a combination of the tax credit, incredibly low interest rates, values that already adjusted downward, and the continual pressure that always exists on the entry-level as the population grows. You must also keep in mind that new construction, which was everywhere during the first years of this decade, has vaporized from the landscape.
I think the lower end of the market is simply being revalued (upward), based on demographics and the perception of value that exists there. At the same time, the high end of the market is also being revalued (downward), based on the lousy economy and the fact that financing is so hard to get. Much of the construction boom was fueled by easy financing... and so the "value bubble" was also based on easy financing.
Until credit becomes more accessible, there simply aren't enough qualified buyers (by today's standards) at the high end of the market to absorb the glut of homes we see today. And that spells continued deterioration at the high end, with continued upward pressure on those homes that are at more affordable price points.
