Saturday, February 04, 2006

House Price Index

by Osman Parvez

The housing bubble blogs are using House Price Index charts developed using HPI data from the Office of Federal Housing Enterprise Oversight (OFHEO). Perhaps you'd like to see how Boulder and Denver compare to markets where bubbles likely to exist?

Ok, let's compare Boulder and Denver (green and red, respectively) with San Francisco, Boston, and Miami's real estate markets. As usual, click on the charts below for larger images.



Looking at the chart above, it seems to me that when the telecom collapse followed the stock market crash, our region's real estate market cooled substantially relative to these other markets and thus was largely spared the bubble.



Zooming in a bit, look at the trend from 2000 onward in the chart above. The bubble markets shoot through the roof. Not so Boulder and Denver. It's fairly clear our regional real estate market has behaved very differently (more rationally).



For even more clarity, I've drawn approximate trends on the chart above in Pink. There's a big gap between the house prices in the bubble markets and our local/regional real estate prices here in Colorado.

Thus, more support for the notion there's no housing bubble in Boulder or Denver. Even so, we will still be impacted from the deflation impacting other real estate markets. For buyers/investors, this could actually be a good thing. Just like the stock market, short term fluctuations in prices are largely psychological and not based on the most important determinant of price - fundamental intrinsic value. In the next few months, there may be very good opportunities ahead for the value investor or home buyer with a reasonable holding period.

Most of our new clients are from out of state, often from the coasts. They are often driven away by the high cost of housing in their home markets, have discovered our little mountain paradise and are doing the math. The impact to these buyers of cooling bubble markets is uncertain, but I suspect it may continue and thus perhaps cushion us somewhat from collateral psychological impact. In either case, smart investors and home buyers should be prowling for buying opportunities in the next 6 to 12 months as other markets cool.

As always, The Realty Unique Team will gladly assist you in finding a dream home or good investment property here in Colorado. Please contact us for a consultation.


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The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.   We strongly recommend conducting rigorous due diligence and obtaining professional advice before buying or selling real estate. 

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