Can Denver’s fall in housing prices off its peak be contributed to politics? How does Denver stack up to other cities with different politics? Are Denver’s current woes a blip or a trend? Where do prices head from here? Take a look at the chart above, what is happening with the red line (Salt Lake City) vs the green line (Denver)?
A recap of the election results in Denver County
Denver has swung very far to the left in this last election, in previous cycles Denver was more of a toss up, but now it is clearly a blue city. Let’s put this in perspective, nationally Trump won 50% of the votes vs Kamala 48%. In Denver voters clearly gave Harris a huge win with 77% of the vote. To put this in perspective, Portland Oregon, one of the most liberal cities in America was at 79% for Harris.
What does the data say about housing prices after the election
Looking at the chart above, there are some clear trends. Portland Oregon (blue) and Denver (green) are tracking almost lockstep very similarly to how they voted in the last election. On the flip side Salt Lake City hit a peak and is now recovering after a brief slowdown while Dallas is basically continuing their peak.
Why are housing prices now falling in Denver?
Denver over the last 4 years has become increasingly difficult and expensive to do business in. For example there are numerous initiatives to ban businesses from gas stations to meat packing plants. Every time you turn around there is another regulation that adds time and expense to businesses from new labor laws, high minimum wage, high cost of living with taxes, etc… Couple these items with crime, homelessness, etc.. and people are fed up. Companies are voting with their feet leaving Denver to other more pro business cities like Salt Lake City.
Why are prices rising in Salt Lake City
Salt Lake City has clearly benefited as a “replacement” for Denver in the inter mountain west attracting companies with their business friendly policies and lower crime/homelessness than Denver. Salt Lake was ranked 1st on job creation while Denver has tumbled to 25th place in the job rankings list.
In Salt Lake, Delta Air Lines recently opened a $50 million training center in Salt Lake City, Utah. Texas Instruments is investing $11 billion in a semiconductor manufacturing plant in Lehi. OmniTeq is relocating its headquarters to Northern Utah, bringing thousands of high-paying jobs.
Phoenix vs Denver
The migration out of Denver is not limited to Salt Lake City, we are seeing cities like Phoenix also continue to increase as opposed to Denver.
Up until recently, Arizona and Colorado had remarkably similar economies, with Colorado having a slight edge — from state GDP and growth trajectories to population and jobs. But something happened in Colorado around five years ago that set us on a different course. For the first time since the Great Recession, Arizona’s economy now outpaces Colorado’s, even when factoring in the impacts of the pandemic.
According to the Arizona chamber’s report, the shift in tide came after Colorado’s 2019 state legislative session, which sparked the rapid onset of new mandates, costs and regulatory burdens on the business community. As the report’s joint authors at the Common Sense Institute said, “the lesson of Colorado’s anti-business policy transformation over the past half decade shows that climates can change quickly.”
3 drivers of migration to redder cities:
It is not random that bluer cities are underperforming redder cities. Below are the three primary drivers
- Business friendly policies: Cities like Denver are killing businesses with red tape making it unprofitable for many to operate in the state. The regulations range from huge labor initiatives to ballots that attempt to shut down businesses. Long and short businesses are finding better alternatives for their businesses which is leading to a huge loss in businesses in cities like Denver.
- Homelessness/crime: Cities like Denver and Portland have seen huge upticks in homelessness and crime compared to redder cities. Although the root cause of why is certainly up for debate, the results are clear. The Bluer cities are struggling more than many similar sized cities. A recent crime index shows crime in Denver at roughly double Salt Lake City (32 in Salt Lake City vs almost 60 in Denver).
- Consumer confidence: This is hard to measure in real estate but we have seen in various economic models that democrats are more pessimistic on the economy than republicans. With Denver being so far left it would make sense that Denver residents are less optimistic on the economy than other cities which is leading to less optimism on big ticket items like real estate. How much this is playing into Denver’s real estate market is debatable, but clearly there is a correlation between optimism and pricing.
Should you invest in Redder cities?
If you were buying a property, should you focus on redder cities as opposed to bluer cities like Denver? From a true economic perspective, for the next 4 years cities like Salt Lake or Dallas will outperform cities like Denver due to one primary driver, business growth. Businesses are locating to cities like Salt Lake City that have comparable/better quality of life than Denver yet considerably more business friendly with less red tape and regulations. Most importantly, cities like Salt Lake city give businesses confidence in long term planning on what the regulations will be so there are no surprises. When companies like Delta are making 50 million dollar decisions, business certainty is critical and cities like Denver are causing business uncertainty with their policies. Furthermore, the increases in crime and homelessness in blue cities has increased leading to even more doubts in businesses minds about locating to an area.
A prime example is TIAA, a financial services firm, that recently left Denver. According to the company, the move will “provide substantial savings in rent and operational costs – savings which TIAA can then invest in business needs and serve the best interests of clients”. This employer alone had 1k jobs plus all the support jobs that are created as a result.
Unfortunately, I do not see the trend of migration to redder cities changing anytime soon as the bluer cities continue to go further left leading businesses to relocate to other locations.
Please note, above is general advice at the city level . But, always remember that real estate is very focused on location. Even in cities like Denver, there are excellent values and locations, and I wouldn’t hesitate to buy/invest in certain areas of Denver and the inverse is also true.
Additional Reading/Resources
- https://www.mansionglobal.com/articles/move-over-denver-salt-lake-city-is-americas-mountain-west-darling-now-29934fc9#.
- https://www.wsj.com/economy/jobs/utahs-tech-hub-powers-americas-hottest-job-market-wsj-ranking-finds-e67d0171?
- https://coloradohardmoney.com/denver-targets-businesses-again-this-time-it-will-hit-your-tank/
- https://coloradohardmoney.com/denver-will-vote-to-ban-one-business-in-the-city/
- https://gazette.com/opinion/perspective-colorado-has-fallen-behind-in-economic-growth/article_0bcbbdf6-bb8c-11ee-a436-530d0e5956f4.html
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Glen Weinberg personally writes these weekly real estate blogs based on his real estate experience as a lender and property owner. He is the owner of 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 Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors Magazine, The Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
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