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What will drive Denver real estate in 2021, # 8 rank
There has been allot of talk about Denver being primed for a long term decline in real estate. Will this actually occur? Short answer no. Why? Simple math more people are moving to Denver than leaving. What does this mean for real estate values in the short term and long term?
What was in the Data?
In a recent Bloomberg Survey, Denver, Colorado was ranked 8th on the top cities to relocate to. One of the biggest factors was cost of living. Even though Denver is expensive, it is still considerably cheaper than many coastal cities.
- Austin, TX
- Phoenix, AZ
- Nashville, TN
- Tampa, FL
- Jacksonville, FL
- Charlotte, NC
- Dallas, TX
- Denver, CO
- Charleston, SC
- Seattle, WA
What does this mean for Denver real estate in the short term?
Denver is radically different than the 7 cities that lead it in relocations. The number one driver is cost of living. All seven cities have considerably lower costs of living due to lower home prices (even Austin has a median price of 460k vs. Denver, 630k). The key driver of lower home prices is the supply of available homes. The Denver metro area is basically built out with not much more space to build (outside of metro there is considerable building on the North, East, and South sides, but most of this building is outside of Denver county and the Denver metro). This lack of space to build and high building costs is driving up prices in the Denver metro area.
With more people moving to Denver than leaving, demand is outstripping the available supply leading to considerably higher prices. In the short term this trend will continue with prices appreciating in the metro area, albeit not at the torrid pace we saw last year.
What does this mean for Denver real estate in the long term?
In the short term, Denver will continue to remain desirable for its lower cost of living, but at the current pace this advantage. If you assumed that the last 10 years is indicative of the next 10 years, the median home price in Denver would increase to 963,000, this would put Denver as #11 on the most expensive cities in the US and about the same as New York and DC. With prices now the same as more expensive coastal cities, Denver’s advantage as a relocation destination evaporates. Assuming Denver increases, the median home price within Colorado will also increase to 763k.
In the short term, Denver will get a bit more of a boost from the Covid relocation bonanza, but the long term is telling a different story. As Denver’s prices continue to increase, prospective relocators will choose other less expensive cities like Salt Lake, Boise, or cities throughout the sunbelt. Denver can’t go up forever; the basic economics of supply, demand, and pricing will eventually temper the growth
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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 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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