193,000 Coloradans moved away from the state last year. “We are seeing that there has been an increase in outs — the highest on record,” said state demographer Elizabeth Garner. Don’t worry, the bottom is not falling out. There are still more people moving here than leaving, but the reasons people are leaving will impact real estate price appreciation and slow the population increases in the near future.
According to a survey by the Denver Post, the number one reason cited by people leaving Colorado is the cost of living. Housing prices in Denver are up 58% in the last 8 years while the average apartment rent is up 63.6% during the same period. This huge increase in living costs has far exceeded any increases in salary (15% over the same period) and therefore has priced many people out of the market. The high cost of living is no surprise given what we all have witnessed throughout the front range and many markets throughout the state.
A number of other items were cited in the survey: traffic, political climate, jobs (found this interesting with all the companies relocating here). Even though more people are moving out there are still plenty moving in; there was a net increase of 30k new relocations to the state which is the lowest level in 7 years.
What does this mean?
Denver and the front range are still desirable places for businesses and their workers. I don’t see this changing anytime soon. Employers are still attracted to the area based on the large population of highly educated workers and technical workers. (See what Colorado City will grow the fastest) The out migration does mean that the market ultimately will come into better parity meaning that supply and demand in the market will not be so far apart. This will ultimately lead to a more moderate rate of increases in real estate.
What should you do?
Be careful trying to time the market. We are somewhere near a peak in the market and net migration will not continue the rapid appreciation we have seen the last 8 years. This is critical for short term real estate investors (fix and flip). Investors should evaluate if they will need to sell sometime in the next 1-3 years, if so, now could be a good time. If the ultimate goal is to hold. Most markets in Colorado should hold up fine and appreciate modestly over a long period of time so the recommendation would be to just sit tight.
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Written by Glen Weinberg, COO/ VP Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in the Colorado Real Estate Journal, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
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