By Louis S. Barnes, Capital Markets, Premier Mortgage Group
A real estate boom is a great thing, capable of building multi-generational wealth.
The trick is to not over-do it. And we’re not.
The Front Range Rocket began right after New Year’s Day 2013 with light-switch intensity. It had taken a half-dozen years to work off distressed inventory, and sudden scarcity then intersected with accumulated purchasing power and flat prices back to 2002. Thus healthy booms are born.
Our markets now show every sign of moderation, a good idea in housing, food, drink, and lots of things. Tapering prices now neatly correspond to the income accumulated since 2002, yet our local economy is strong and generating additional income, enough to sustain further price gains, just at a lower slope. Another telltale sign of a cooling market is rents, which are beginning to flatten after a big increase. They should flatten: Denver alone has added over 1,000 new apartments every recent month. We are short of land for detached houses between I-25 and the foothills, but we have plenty of sites for attached housing of all kinds. And we’re going to create more by re-zoning, and converting commercial and retail land into high-density residential.
Stabilizing rents are a disincentive to investor-buyers, and there is now a lot of attached supply in the pipeline—although it’s weighted to higher quality and cost. The shortage of single-family land is now permanent, which presents both an opportunity and some healthy self-limitation. The opportunity: Buy the product that is most scarce. The limitation: Colorado is no longer an inexpensive place for relocating businesses and employees, as we were in 2013.
Our last several booms ended as neatly as a cat jumping onto a fireplace mantle. This one looks to continue, just with less drama than its first five years.