Home Prices: Now for the Good News

by Brad Reagan and Elizabeth O’Brien, SmartMoney.com

Denver’s overall outlook is sunnier than for most western cities because neither inventory nor prices spiraled out of control during the boom. Dinged by a telecom bust earlier in the decade that cost the city 5 percent of its jobs, the local economy wasn’t primed for irrational exuberance. Now with six months’ worth of homes in inventory — the level most experts judge to be roughly in balance — the city offers considerable upside.

In particular, upscale buyers are flocking to Cherry Creek, the tiny neighborhood that’s home to Neiman Marcus and Cherry Creek Arts Festival, one of the country’s top urban arts fairs. Here, prices leaped 16 percent in the past year, according to Integrated Asset Services, an firm specializing in mortgage investments. The area’s popularity illustrates a common theme in U.S. housing:  established, close-in neighborhoods are often holding up better than suburbs, because they didn’t endure overbuilding and because higher-income owners were less likely to need subprime or adjustable-rate mortgages.

Cherry Creek’s success also highlights the strength of the envy factor. In a recent survey of luxury homeowners, 17 percent said they’ve considered moving to get into a certain address or zip code — a reminder that the lure of prestige or good schools moves homes even in a shaky economy. Cherry Creek’s 80206 zip code may be Denver’s ritziest  — as seen in the new development NorthCreek, which features a mix of million-dollar tower condos and brownstones along with a private garden courtyard, à la New York’s Gramercy Park.