With initiative 74, which I wrote about last week, looking to likely pass, legislatures agreed…
Wow, what a wild ride Colorado real estate has been on the last year. The statistics are astounding! Denver county average sales price is up almost 30% year over year while days on the market has plummeted 40%. In the mountains, in places like Summit County prices are up 43% year over year. What happens to Colorado real estate when the pandemic trade reverses? With these off the chart numbers, where does Colorado real estate go from here?
Background on Colorado real estate during the Covid pandemic
Wow, what a wild ride it has been in real estate. Who could have predicted the huge rush into real estate in the last year. The huge jump in prices are not limited to Denver or the ski resorts. Even areas like Montrose have gotten into the game with prices up 26% over the last year. In essence the entire state from the rural markets to the ski resorts and downturn Denver have excelled during the pandemic
Where do we go from here in Colorado real estate?
It is not possible to continue the eye-popping appreciation throughout Colorado for one simple reason. Incomes are not keeping up with appreciation. At some point people do not have enough income to afford the high costs of housing. Furthermore, as the pandemic resides old habits will be hard to break. What does this mean for Colorado? In a nutshell the market will begin to change as the pandemic trade reverses. I think it is important to look at three groups of markets in Colorado, The Denver front range, Resort Communities, and then the more rural areas/ exurbs. Each will react differently in the coming twelve months.
- The Denver Front Range: The Denver front range has far outperformed any expectations. Many predicted that there would be a mad rush out of cities like Denver. What ended up happening is there was a mad rush out of high density cities like New York into mid market less dense cities like Denver. As the pandemic subsides, Denver will not only remain desirable but will excel. Many companies are setting up regional offices in knowledge centers and Denver continually tops the list. There is no way for Denver to continue to appreciate at 30% a year, this should moderate to a more manageable 5-10%
- The Resort Communities: The ski towns have been on an incredible ride with some like Aspen doubling over a 12 month period. Many flocked to these areas to ride out the pandemic; I suspect that many will return to their traditional lifestyles as the pandemic subsides. For example, not everyone is going to be able to work remotely from Steamboat. Companies like Google and Amazon are already recalling workers. I don’t see any drop in prices due to the shortage of inventory, but demand will moderate. Ski towns also will get into a more normal appreciation pattern going forward.
- Rural markets/ exurbs: Even rural markets like Montrose on the Western slope are up 25%. Furthermore, exurbs throughout the front range are in high demand. I don’t see this trend lasting much longer. As workers are recalled to the office, the commutes will not be manageable and demand for exurbs and remote markets will reverse. I think you will see a best case where some of these markets stay constant, but there is also a high probability for a correction in many of these markets. This is the area I am most cautious about.
In a survey of more than 350 CEOs and human resources and finance leaders, 70% said they plan to have employees back in the office by the fall of this year, according to a report by staffing firm LaSalle Network. “I think every office will have re-entry done by Labor Day,” said LaSalle Network’s founder and CEO, Tom Gimbel. The pandemic is coming to an end and the wild ride in appreciation will wane over the next year with some rural/exurban markets at risk of a correction. What are your predictions for Colorado real estate and the reversal of the work from home trend?
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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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