Denver Surpasses Tampa as Market With Fastest-Falling Home Values

Home values in Denver are falling faster than any other major metro area tracked by a key index, earning the Mile High City a dubious distinction as the weakest housing market in the nation.

More than half of major U.S. metropolitan areas posted year-over-year home price declines in February, with Denver (-2.2%) displacing Tampa (-2.1%) as the weakest market, according to data from the S&P Cotality Case-Shiller Index released Tuesday.

Los Angeles (-0.8%) and Washington, DC (-0.1%) also joined the list of markets with falling home values, signaling weakness that expanding out of the long-suffering Sunbelt region.

Nationally, the value of single-family homes as measured by repeat transactions rose 0.7% annually in February, down from a 0.8% rise in the previous month.

"More than half of major U.S. metropolitan markets posted year-over-year price declines in February,
signaling that the housing slowdown has broadened well beyond its Sunbelt origins," says Nicholas
Godec, head of fixed income tradables and commodities at S&P Dow Jones Indices. "The geographic mix has shifted meaningfully."

The slowdown in Denver's market has been long forecast by experts, with Realtor.com® reporting last spring that the market had seen an explosion of inventory that presaged falling prices.

Local real estate agents say a combination of factors is to blame, including a slowdown in migration to Colorado from other states, rising insurance costs, and a downturn in demand for condos and townhomes, which make up an outsized share of the Denver market.

Weakness spreads to new regions

In the Pacific Northwest, Seattle (-2%) and Portland, OR (-0.86%) also posted annual declines in the latest Case-Shiller data.

Meanwhile, the strongest markets remained in the Northeast and Midwest. Chicago led all metros at 5.0% annual growth, followed by New York (4.7%) and Cleveland (4.2%).

"The 7.2 percentage point spread between Chicago and Denver illustrates how localized the housing story has become," says Godec.

Realtor.com® senior economist Anthony Smith agrees, saying that February's results show that price cooling has reached beyond the typical regions.

"Markets that were holding positive territory as recently as last fall, including Los Angeles and Washington, have crossed into negative annual returns," he says. "In supply-constrained Midwest and Northeast markets, price growth is likely to hold. But today's data suggest the correction in more supply-rich metros has more room to run, with the broadening of declines into new geographies pointing to continued fragmentation rather than a national turning point."

The Case-Shiller Index reports on a two-month delay and reflects a three-month moving average of home sales prices.

Homes usually go under contract a month or two before they close, so the February data primarily reflect purchase decisions made in the late fall or early winter.

Although the Index's price data is delayed by several months, it is considered one of the best available measures of changing home values, because it is based on repeat transactions on the same properties.