Denver Real Estate: 5 Reasons it is NOT a Bubble

3/2/2016

People ask me some form of the same question all the time. It usually goes something like this: “Housing is hot in Denver, but don’t you think it’s just a bubble and when is it going to pop?” I’d be lying if I said I never asked myself the same question, as my father always said, “if it sounds too good to be true, it probably is”. Since the Foreclosure Crisis brought attention to the concept of an economic “bubble”, others have felt the same way. I think we initially react to “excessive” investment gains with a healthy amount of skepticism, especially when it comes our personal homes, there is an inherent emotional aspect that can carry a lot of weight. “Am I missing something, or will history repeat itself?” Somewhere in the middle is the difference between those who have found themselves realizing the benefits and those who are left saying shoulda, coulda, woulda. Simply because something takes-off doesn’t mean it has to crash.

For those unaware, the Real Estate market in Denver is up nearly 55% over a 5 year period and 30% over 30 year period. Averaging 10% per year appreciation and 34% year-over-year increase in the median list price, Denver is THE #1 hottest real estate market in the country! While these excessive gains may cool over time, the real estate market is still a function of supply and demand. With nearly 200 people moving to Denver each day, current demand is outpacing new construction to house that demand- we simply are not building fast enough! Now, I am no economist, but from the real estate side the market will keep its momentum as long as the demand continues. Here are 5 reasons why I don’t see demand going anywhere and how the wealth of Denver’s’ work force contributes to accelerate the real estate market.

1. Tourism: One of the strongest economic drivers, tourism provides a valuable source of jobs and revenue. In 2014, 71 million people spent 18.6 billion dollars here, an all-time high for the state.

         A) First Class Skiing: Denver is located just a short drive away from some of the best ski resorts in the world. Vail, Breckenridge, Beaver Creek, Loveland, Winter Park and Aspen are just a few of many world-class resorts available to extreme powder chasers and family riders alike. These resorts attract people from all over the world and bring in billions of dollars in revenue.

         B) Outdoor activities: Even while the snow is away, there is still plenty of fun to be had in Colorado’s 300+ days of sunshine. It’s a major destination for many Americans, particularly Texans and others in close driving proximity. Hiking, biking, fishing, kyaking, horseback riding, camping, you name it, you can find it here in Colorado. The endless possibilities make it a fantastic family get away, and I don’t think the mountains are going away any time soon.

         C) Integrated Mass Transit: FasTracks, Denvers light rail system, is undergoing mass expansion to the surrounding metro areas as well as the Airport. The new East Line will provide tourists and residents with seamless travel from the Airport to Denver, Boulder to Downtown, Red Rocks to Littleton and Centennial. ­­

          D) Arts and Music: Denver has such a diverse population, which can be seen in the arts. The Santa Fe arts district is a major attraction along with top notch museums. On the music side there is always “Red Rocks”? Arguably (and in my opinion) the greatest concert venue in the world plays host to the best-of-the-best acts and musicians. Every Friday and Saturday in the summer, people gather at this awe inspiring place to relax and make memories that many travel across the country to experience. In addition, there is a growing industry that accommodates a large number of people traveling to Colorado to experience, and it is that of Marijuana Tourism.

2.  Growing Employment Base: The starting point in measuring the strength of the economy and real estate market in any location begins with the employment base, and Denvers’ is top rate. Not only is the employment base strong and stable, but it’s growing and diversifying, attracting more industries, investments and talent to the area.

          A) Financial and Commercial capital of The Rocky Mountain Region: Also known as “The Wall Street of the Rockies,” Denver is THE major shipping, distribution, industrial and commercial corridor to Colorado and bordering states New Mexico, Utah, Wyoming, Idaho and Nevada. On the financial side, Denver is on track to become Charles Schwab Corp.’s largest employment center in the US by 2018, the brokerage company’s CEO says. Recognizing Denvers growth and appeal, Charles Schwab shows confidence in the Denver economy, a lead that has not gone unnoticed as aerospace giant Lockheed Martin continues to dig-in roots in the Denver area.

          B) Investment boom: Big name real estate investors are putting in large commitments to the metro area. Hines, a global real estate investing firm whose impressive resume includes The Lipstick building in New York and Salesforce tower in San Francisco, is building a 15 story Class A skyscraper (the tallest build in Denver since the 80’s) on 15th and Lawrence St to house office space and corporate employers. Others are following the lead. With over 1.8 million square feet of commercial office construction downtown, these investments show trust in a growing employment base to occupy the spaces. 1144 Fifteenth Skyscraper

          C) Growing Workforce: Metro Denver’s employment growth in 2014 was more than 1.3 percentage points higher than last year at 3.2 percent, which included gains in each supersector except information. Economists forecast job growth in 2015 to be 3 percent, which represents the addition of about 45,000 jobs. Attracting high talent continues to drive the cycle and lure more employers, and these professionals with higher paying jobs are able to spend more money on their homes. Which brings us to number 3:

                    Above: 1144 Fifteenth- See for yourself!

3.  Excellent Education: Colleges and Universities attract and create skilled professionals. Skilled professionals attract and demand high paying jobs and more money to spend on housing.

A) Educated Population base: Fun fact of the day- Denver is one of the most educated cities in the U.S. With nearly 40% of its residence holding college degrees, we are right behind Washington DC and San Francisco and gaining ground.

B) First Class Universities: There are a multitude of top notch schools within a stones throw of Downtown. University of Denver, University of Colorado, Metropolitan State, Regis University, and the Denver School of Nursing are just a few of many. Specifically in the Medical field, there have been substantial investments. The University of Colorado-Denver’s new Anschutz Medical Campus integrates world-class education, research and patient care on one of the nation’s newest health sciences campuses.

4.  Legalization of Marijuana– No matter what side of the fence you stand, you cant argue with numbers, and marijuana was a $700 million dollar industry in Colorado last year. According to the Washington Post, this segment of the market generated over 70 million in tax revenue and is expected to climb to $94 million annually by 2016.

Those are real dollars with real impact! A large chunk of that money goes straight into education: a constitutional amendment in the law promises $40 million a year to building schools and investing in education. Many cities around the country are underwater or fighting for revenue.  For example, Atlanta is currently trying to figure out how to fund its rail line to accommodate for traffic demands, and the only answer seems to be raising taxes.  Many states are looking to marijuana reform to fund the projects they desperately need while Colorado tax payers keep more money in their pockets.

5.  Quality of Life: With nearly 300 days of sunshine, top notch outdoor activities, a thriving economy and a downtown with incredible restaurants and night life- all set against the picturesque background of the Rocky Mountains, Denver simply sells itself. The financial meltdown of the mid 2000’s wiped a lot of money out of our economy, leaving many people reexamining what they found to be important in their life. As we have continued to recover, those with a thirst for adventure, a desire to experience nature and a passion to live in a prosperous, diverse environment have been able to find themselves a home in Denver, CO.

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