What happened in CO Springs that impacts your real estate?

by | May 7, 2018 | Colorado Living, Colorado Private Lending, Colorado Real Estate values

As we all know, Colorado, and especially the front range is growing rapidly.  This growth means more development.  These new developments all require resources from increased water needs to gravel for the roads.  At the same time development demands have increased, resources in the area have become scarcer and developments have become more contentious with various stakeholders.  What happened recently in CO springs regarding a development that will impact you and your real estate?  Why is this significant for other parts of the state of Colorado?

About Colorado Springs:  Colorado Springs is one of the more conservative areas not only in Colorado but throughout the country  It was recently ranked the 4th most conservative major city in the country (source Colorado Public Radio) while Denver is on the other end of the spectrum (20th most liberal).  This conservative classification of Colorado Springs makes the recent development proposal more impactful.

What happened?  A recent gravel company proposed building a new gravel mine south of Colorado Springs.  The gravel was to be used for various developments in the area including the expansion of I 25.  State regulators have permitted 1260 similar mines (source Denver Post), but this mine was different.  There was considerable pushback from the 4th most conservative city in the country.  This proposal was ultimately stopped due to the large amount of local opposition.  The development was rejected.

Why is this important?  The development proposal in Colorado Springs likely would have been approved in the past.  Colorado Springs along with the entire front range and many of the mountain communities has drastically changed demographically.  This change led to the defeat of the development proposal in Colorado Springs and will likely lead to tougher development approvals in the future.  This defeat shows a profound tilt towards development restrictions.

What does this mean for real estate?  If you are developer, it will get tougher to get new developments approved and likely costlier to go through the approval process.  This will occur throughout the front range and most of the mountain communities.  As development becomes tougher, more expensive, and more restrictive there will be other secondary impacts to real estate:

  1. Supply Caps: A slowdown in development will continue to “cap” the supply of new inventory. As more people continue to move to the state, development will not be able to keep up with demand and supply will become even more constrained.
  2. Prices will increase: As supply decreases and demand stays constant (or increases) prices will continue to go up.  The Denver metro area and entire front range will continue to appreciate as supply is constrained. You’ve seen this in various suburbs and mountain communities already that have tougher development requirements.  For example Boulder now has a median home price over 1m and commercial properties are also commanding premiums as supply continues to be constrained.
  3. Market Imbalance: Will prices increase so much that demand will taper off or decline? At what point does price stop net migration?  We all know that prices can’t appreciate forever, over time we will find out what that tipping point is in the front range.

The recent rejection of a gravel mine in Colorado Springs is significant for the entire state.  The rejection represents the changing demographics/priorities of the state of Colorado.  There is no doubt development will become more difficult and as a result supply will not expand fast enough to meet the needs of incoming residents.  Prices will continue to appreciate throughout much of the state of Colorado until supply and demand become more balanced.

Resources/Additional Reading

  1. https://www.denverpost.com/2018/04/25/proposed-gravel-mine-near-colorado-springs-wildlife-preserve/
  2. https://www.denverpost.com/2018/04/26/hitch-rack-ranch-colorado-springs-gravel-mine-wildlife-habitat-rejected/
  3. http://www.cpr.org/news/story/study-ranks-conservative-us-cities-colorado-springs-no-4-aurora-no-10


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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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