No matter what you think will happen to Denver home prices, there is ample evidence to support you.Start with Thursday’s gloomy report from Metrolist on local single-family sales in September. Average prices are down 8 percent from August, median prices are down 4.6 percent and houses under contract are down an eye-popping 18.7 percent.

But there were fewer homes on the market than a year ago. In fact, year-over-year, there have been fewer homes for sale in the Denver area every month of 2007. The glut of unsold homes in Denver, swollen by most-in-the-nation foreclosures, appears to have peaked in 2006. As supply tightens, so does demand, followed by higher prices. In late July, a Wall Street Journal quarterly survey of 28 metro areas showed only Denver and Boston with fewer homes on the market than a year earlier. The rest of the nation’s cities are being socked with foreclosure rates that hit us several years earlier.

Yet it’s far from over here. A report Tuesday showed that foreclosures in our seven-county metro area through the first nine months of 2007 jumped 37 percent over the same period in 2006, which was an all-time record.

Lest that depress you, there’s last week’s issuance of the Standard & Poor’s/Case Shiller Home Price Index. It suggests that Denver’s housing market may be in the early stages of recovery, even as the rest of the nation is slumping. Denver homes posted a 1.3 percent rate of appreciation from May to June - a slim margin, but second only to Charlotte, N.C. From June to July, Denver home prices dropped 0.7 percent, but only five metro areas did better. “The nation is in a bit of a housing crisis, and it is likely to get worse before it gets better,” said S&P Vice President Maureen Maitland. She was cautious when speaking of Denver: “We need to see if the trend continues.”

Before you allow optimism to take hold, consider a story in Wednesday’s Wall Street Journal about traders on the Chicago Mercantile Exchange betting on bigger price drops and a growing inventory of unsold homes. Housing futures currently traded on the exchange reflect an average 10 percent price decline in 10 major cities, including Denver, from mid-2007 to November 2001. Trading is light, but the current contract prices show that traders expect Denver prices to drop 14.4 percent over the next four years. They show Miami prices sliding 28 percent, Los Angeles down 15 percent and Chicago down 6 percent. None of the 10 metro areas traded show a price increase. Especially confounding about the Mercantile Exchange trading is that is it based on expected movements in the S&P/Case Shiller index, the same one that suggested last week that Denver is emerging from its housing slump.

All this data bring to mind Harry Truman’s wish for a one-armed economist who could never say, “But on the other hand . . . ”

Friday morning, I talked to Lawrence Yun, chief economist for the National Association of Realtors. He had issued a report in May that concluded Denver would be one of the top five housing markets for the next two years. Job and income growth will provide solid housing demand here, he wrote in May.

Friday, he said, “Since May, the data I’ve seen continues to affirm the view that Denver will be one of the top markets this year, and the momentum will carry into next year.”

Lou Barnes, who runs Boulder West Financial Services, favors housing data from the Office of Federal Housing Enterprise Oversight. “I’ve gone through hundreds of cities on this thing,” he told me Thursday while directing me through some price comparisons on the agency’s Web site. “It goes back to the mid-1970s, and all you see are periods of big appreciation followed by long flat periods. I don’t see big price declines anywhere. I see Denver home prices being frozen for a while, rather than going into deeper distress.”

Somehow, I’m oddly assured by Barnes’ analysis. Rather than being up or down about Denver’s residential real estate prospects, I’m reminded of a catchphrase I first heard in 2005: “Flat is the new up.”

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http://www.rockymountainnews.com/drmn/business_columnists/article/0,1299,DRMN_82_5715971,00.html