Hare and Turtle of the Housing Market

The journey to recovery is gaining momentum. Clear Capital presents evidence of a strong home price recovery through the Home Data Index (HDI) market report. 2013’s yearly price gains grew at a national scale for 10 consecutive months with a slight decline during the month of November. Overall, last year’s home prices had a full 11.3% gain.
Different markets generated different results, however. According to the report, “it’s a different story” for metro markets. They noted that hard-hit markets received higher gains than others. Phoenix, one of the hardest hit, led the race with double-digit gains. It was not so for markets at Denver, which continued to receive gains at a steady pace. The report cites the tortoise and the hare fable as a fitting description of the situation between Phoenix and Denver. As this race progresses, new markets are likely to forge ahead while other markets strive to maintain stability.
Average cumulative growth of 34 of the 50 largest major metro markets from 2002 to 2006 was at 77%. The reports holds that after this bubble, price declined roughly 50.5%. Metro gains already toppled national gains at 46.2% during the run-up. Between the last quarter of 2007 and 2011, losses subsequently dropped to 38.8%.
First In, First Out (FIFO) markets at the metro level are the hares in this recovery story. Because they were able to cover more ground after the recession, they basically owned the race. These so-called hare markets are now above their troughs at an estimated 42.4%. Phoenix is the very embodiment of the hare and its hasty character, says the report. Since 2002-2006 prices grew an impressive 98.5%, buying a house in Phoenix in the year 2002 could have doubled the investment in 2006. Just like the hare in the story, Phoenix went beyond national losses and fell to the bottom at 61.6%. Homes purchased eleven years ago now amounts to less than its original 2002 price.
On the bright side, Phoenix displays one of the strongest recoveries to date at more than 50% though still almost 40% below peak prices.
While other metros like Phoenix were in a hurry to lead the pack and compete in the rat race, Denver took it slow and steady just like the turtle in the fable. Compared to Phoenix’s whopping 98.5% price growth between 2002 to 2006, Denver’s 2.2% record was certainly a far cry. It was a no brainer for Phoenix as Denver could not even pass off as competition. When the going got tough, Denver maintained stability with 22.4% peak to trough declines. In 2008, home prices grew 28.9%. The Denver market continued to move forward steadily rising 2.8% higher than mid-2006 figures. A $200,000 Phoenix property bought in 2002 is now worth $120,000. Had you purchased a property of similar proportions in Denver, it would have cost you $206,000. Today, there is a limited number of markets that whose current prices have exceeded 2006 levels and Denver is one of them.
So how did Denver do it? Was there a secret? The answer is simple. The steady growth of Denver prices reinforced the metro’s resiliency to meltdowns. What kept the market moving forward was a top tier segment with comparatively low rates (20%) of REO saturation.
In this race, it is still too soon to declare the winner. 2014 is a year full of possibilities for the housing market. Investments will be made or broken, depending on buyers’ choices and their willingness to take advantage of the opportunities already set before them.
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Data included in the HDI market report were gathered by Clear Capital through a wide range of public and copyrighted information sources. The institution is a reputable provider of real estate valuation and risk assessment tools and data. The comprehensive HDI market report is published earlier than other industry reports.

Sara Goldman is the director of content and creative writing for Power Real Estate Marketing, a San Diego based marketing company committed to offering Realtors and Mortgage Brokers marketing solutions that help build their businesses and simplify their lives. Power Real Estate Marketing offerings include: real estate postcards, door hangers, notepads, and magnets to name a few. Our motto is: Better Designs, Better Prices, Better Marketing. Please visit Sara Goldman ‘s Bio to learn more about her.

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