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04/21/2005: "Denver Real Estate Growth Reasonable"

The Rocky Mountain News released a story today and I am glad to see level heads in the local real estate marketplace. Denver's housing is growing at a manageable, reasonable rate, and will probably weather the burst that will happen on both coast due to inflated prices and speculative buying. Read it below after some of my opinion.

The reasons I believe that real estate growth in Denver will be stable for at least a few years falls into four simple bullet points:

1) Natural Disasters - Denver gets no hurricanes, earthquakes, floods or tornadoes of any notability. With the recent natural disasters and an imminent earthquake in California, people looking for a place where mother nature does nothing more than dump a few feet a fluffy, fun snow on you makes Denver extremely attractive. L.A, New Orleans, Florida, other southern and Texas coast cities are affected by peoples views of natural safety.

2) Terrorism - Although Colorado has several high probability targets, there are not any in Denver to attract much investment on the Al Queda front. Denver's sprawl, though arguably not a great attribute, does make our non-dense population centers unattractive for terrorist looking for the high-impact target that would affect 1000's of people at once. New York, Chicago, Detroit, DC and many other major cities have to contend with this.

3) Weather for a major city - Although terrorism and natural disasters could drive someone to Omaha, Cheyenne, Minneapolis or other smaller cities that don't have much of he same deterrents to disasters as Denver, word is our on our amazing weather.

4) Opportunity - Yes, Denver has lost its place as the number one HQ for Cable Satellite and telecommunication have fallen off in General. But we have a good economy, after TCI (ATTBroadband left), Adelphia and Charter put satellite offices here, Comcast maintained both a regional and some corporate offices, EchoStar is unlikely to go anywhere in the near future and John Malone's many broadband investments will want to stay close to the their benefactor. We still have Lockheed Martin and other industries; Qwest is still a strong employer and will probably maintain its foothold on downtown. All in all, moving here means you will still work and with the cost of living as it is, Denver is a bargain compared to the coasts.

5) Resort towns - not only does Denver have excellent proximity to world class ski resorts, it also has turned into a major summer destination. The mountains provide a two fold value for real estate investment. For anyone investing in Denver and any of the resorts from Winter Park to Beaver Creek, there is some useful diversification (within a real estate portfolio) to provide increasing security if one goes down, the other could go up. Mountain towns show no sign of being affected by Denver real estate trends and continue to receive healthy growth.



Slow but steady- Safe rewards await investors in Denver housing market


By Jim Theye
October 8, 2005




As it always does, home-buying activity slowed in September when compared with August, as families raced to settle into new homes before school started.

Compared with last year, prices seem to be rising steadily, without the radical jumps now traditional over the past five to 10 years.

Is Denver experiencing a slowdown? Is a housing crash just around the corner?

While hikes expected in the costs of building materials as a result of the hurricanes may have an unforeseen impact, it is my prediction that the slow, steady growth in Denver's housing prices will continue.

This limited growth often worries armchair economists, particularly when they see markets such as San Diego, Miami and Las Vegas still experiencing double-digit annual appreciation on home prices. But much like the proverbial turtle and the hare, Denver's slower-yet-steady growth poises homeowners to win the race, especially if they are willing to think long term.

The so-called "bubble" cities that have seen dramatic housing price increases - up to 20 percent a year in some places - are sure to experience the "burst." Home prices are often artificially inflated by trading and speculation, a condition that generally leads to a dramatic fall.

On the other hand, Denver's housing market - where our annual appreciation has, in recent years, hovered at about 4 percent - is seen by many of these same analysts and economists as being a healthy, safe market in which to invest in real estate.

Neither a buyer nor a seller's domain, Denver's 2005 market is more transaction-specific - purchase prices and terms are more favorable to the buyer or seller depending on the situation. This frees market conditions from artificial inflation and leads to the slow, steady growth we have been experiencing and, according to analysts, a more favorable economy.

That is not to say Denver hasn't experienced some of the rapid increases and decreases representative of "the bubble." In the 1990s, housing prices saw double-digit growth, while most of the rest of the nation was appreciating at 2 percent to 5 percent annually. For almost a decade, Denver was consistently in the top five cities for annual appreciation as well as population growth. Similarly, the telecom bust resulted in Denver's office market hitting a vacancy rate of about 25 percent - POP!

Today, however, things are looking up. While office vacancy rates still hover at about 20 percent, our city has become one of the best and most attractive office lease opportunities in the country.

How does this affect the housing market? Landlords and owners are working overtime to attract companies that want to relocate. Office bargains combined with the many benefits of Denver - lifestyle, comfortable standard of living - offer a great negotiating position. This is sure to attract thousands of upcoming homeowners in the next few years. With an influx of people needing homes, there will be increased demand for the housing supply, and Denver will be positioned for moderate to good growth expectations.

But many have come to use real estate rather than the volatile stock market as an investment. How does slow appreciation affect them? The steady 3 percent to 5 percent appreciation rate we experienced in 2004 and 2005 will still reap rewards for those willing to hold the property long term or to trade up for a more expensive home.

Consider this example. The average home price in Denver is a little more than $300,000. Without even considering the other benefits of home ownership, 4 percent appreciation over a period of five years would amount to a gain of more than $60,000. The $300,000 home is now worth $365,000.

Considering an initial $30,000 down payment, the investment doubled. How many other investments will double almost certainly over five years? Not very many.

Additionally, homeowners reap benefits not available from any other investment: tax deductions, the ability to greatly leverage their downpayment, equity to borrow against, as well as the pride of ownership.

So leave the worrying to the armchair economists. Denver's sure and steady growth is sure to win the race.



Jim Theye is a longtime real estate agent with Kentwood City Properties.

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