Monday, January 25, 2016


So far, 2016 is looking a lot like 2015.

Three weeks into the year and we are back into frenzy mode, with multiple offers the norm for almost everything in the Denver metro area below $500k that isn’t falling down. 

The market is overflowing with frustrated buyers chasing limited inventory, just as it was in 2013, 2014 and 2015.  While I do think election-year fear mongering and a deflating stock market will cause some slowing in the second half of the year, slowing isn’t the same thing as stopping.

The bottom line is that it will take something pretty catastrophic for us not to have another solid year of appreciation, meaning that whatever you’re chasing for $400k today is going to cost you a lot more if you wait until next year.

How much, you ask? 

Well, if you assume just 5% appreciation on a $400k purchase price over the next 12 months, that’s $20,000.  Divided by 366 days (it’s a leap year), that works out to $54.64 per day for each day you wait. 

No luck today?  That’s $54.64.  Nothing tomorrow?  That’s $109.28.  Wait a week?  That’ll be $382.51. 

In fact, if you really want to make this hurt… consider what your mortgage costs would be on a $400,000 home if you closed on one this afternoon. 

Assuming a 20% down payment, that’s a $320,000 mortgage at 4% (rates are actually better than that right now, but I want the illustration to be conservative).  That payment works out to $1,528 per month.  Throw in $300 per month for taxes and another $150 per month for insurance, and your total payment is $1,978. 

Multiply that by 12 months and you get total annual payments of $23,736.  Divide that by 366 days (leap year) and you get $64.85 per day. 

So if you buy today and home prices go up 5% - a conservative estimate by almost every projection – your actual cost of home ownership for 2016 is about $10.21 per day, plus utilities.  All of a sudden, the numbers make a little more sense, don't they?

If you're renting a comparably-sized house, your rent is likely $80 per day or more, and you're getting none of the tax deductions reserved for home owners.  

I only share this to frame the potential opportunity cost of waiting for the return of a market that has long since moved on. 

Facts are facts, and the fact is that buying a home in the Denver metro area is not necessarily a pleasant experience anymore.  It’s stressful when you find yourself sometimes waiting in lines two or three parties deep just to get in to see a house.

It’s frustrating to finally find “the one”, only to learn that seven other buyers have already written offers. 

But the people who are having success in this market – the ones who are going under contract and going to closing – those people are looking forward, not backward. 

If competing scares you, or if you are worried that there’s a trap door under the market that somebody standing behind a curtain is just waiting to pull the lever on… then just back away right now.  Go sign another lease.  Or move to a more affordable locale. 

Because in Denver, big money is showing up and it’s ready to buy, now. 

Truth is, there has never been a 10-year window where home values have gone down in Denver, ever,  We all want the deal our friend got in 2012, but it’s not going to happen.  Record low inventory.  Unemployment rate of 3.3%.  Nearly 100 people a day moving here from California alone.  CU Leeds projecting population growth of 95,000 in 2016 with more than 8,000 new jobs being created every month. 

Where are all these people going to live?

If those numbers are real, then so is the value in this market, even at 2016 prices. 

If you want to cross that bridge from renting to owning, you’re going to have to come to terms with it.  Or you’re simply going to spend another year going in circles, making someone else’s mortgage payment instead of your own while prices go up even further.  

Tuesday, January 19, 2016


Over the past few years, gentrification has swept over Denver like a rising tide.  It started with the Highlands, then Berkeley, then Sloan’s Lake.  It was followed by neighborhoods like Five Points, Whittier and Cole.  Then Baker, Cap Hill and Cheeseman Park.  Now it’s the RiNo district, Globeville and Elyria-Swansea where investors, flippers and speculators are buying up everything in sight.

All over town, thousands of lower-income residents are being driven from homes and neighborhoods they can no longer afford.  Kids and families are being displaced, school and community demographics are changing, and high-end remodels and so-called "luxury apartments" are going up in record numbers.

From the outside, it’s all looked great.  Urban renewal.  Capital investment.  Jobs. 

Problem is, from the inside, it looks a lot different.  Financial and family stress.  Disruption.  Homelessness. 

You can find some well-written and insightful articles on gentrification and its impact on communities in publications like 5280 and Westword, and online by following sites like DenverUrbanism.

But as we enter into 2016 facing our fifth consecutive year of surging home prices and massive migration, a new thought is emerging.  Maybe gentrification and the impact of soaring home prices isn’t just a lower socio-economic class issue.  Maybe it’s bubbling all the way up to what has historically been Denver’s middle class. 

What if, in the not too distant future, homes priced in the $200s disappear the way homes priced in the $100s have vanished since 2011?  With a median home price in the mid $300s and bidding wars ongoing for everything that isn’t falling down, how much longer before an 1,100 square foot ranch built in the 1960s sets you back $400k? 

Gentrification has always been an emotional issue, but it’s a lot more emotional when the waters reach your shore. 

In 2011, I sold 14 homes priced below $200,000 in the Denver metro area.  Last year, I sold one.

In 2011, there were a total of 11,847 sales of homes in the Denver MLS priced below $200,000.  Today, if you draw a box from Boulder to Highlands Ranch to Parker to Brighton… there are a total of 48 homes on the market priced below $200,000.

Simply put, sub-$200k homes don’t exist in Denver anymore.

In fact, if you look at the distribution of closed single-family detached sales in 2011 and 2015, bracketing by different price ranges, you’ll see what a completely different market Denver is today versus just five years ago.

$0-$200k:  In 2011, there were 11,847 closed sales.  In 2015, 1,698.  A decline of 85%.
$200k-$300k:  In 2011, there were 6,371 closed sales.  In 2015, 11,062.  An increase of 73%.
$300k-$400k:  In 2011, there were 3,118 closed sales.  In 2015, 9,170.  An increase of 294%.
$400k-$500k:  In 2011, there were 1,479 closed sales.  In 2015, 4,608.  An increase of 311%.

As I have written about previously, since the beginning of 2012 home values in the city of Denver have gone up by nearly $18 million per day, every day, now accounting for nearly $30 billion in equity gains.  Clearly, Denver has become an affluent place to live.  Or, as a friend of mine who runs a tech business describes it, "Denver is now the fastest growing suburb of San Francisco."

And with 270 people per day moving to Colorado last year and similar numbers projected for 2016, somehow the thought of having a total of 48 homes for sale under $200k makes further price increases seem like a virtual inevitability.

Thursday, January 14, 2016


I’ve always said the best time to list a home for sale is early in the year, and the logic is pretty simple. 

While most sellers are more established and more beholden to the school calendar, first-time buyers and those trapped paying sky high lease rates are not.  And every year, it seems that thousands of people make the decision during the holidays to buy a new home after the first of the year. 

January hits and all of these freshly motivated, fired up buyers come out swinging… and there’s virtually nothing on the market. 

I’ve been quite active with buyers over the first two weeks of the year and I can tell you that this pattern is repeating itself yet again.  In the southwest metro area (Lakewood and Littleton), for example, there are 89 total listings under $400k.  A staggering 70 of them are under contract!

That’s roughly 79% of the inventory, which is pure insanity.  Remember that a “normal” market has about twice as many homes for sale as there are under contract at any point in time. 

Run the numbers forward, and with 70 homes under contract there should be about 140 on the market.  There are 19.

Run the numbers backward, and with 19 homes on the market, there should be about 10 under contract.  There are 70.

Looking at new listings after 4 p.m. on weekdays, it’s not uncommon to be stacked up two and three parties deep in the driveway waiting to get in.  On the weekends, you simply need to budget an extra 15 to 20 minutes per listing to account for your wait time. 

I’ve spent much of the last year looking for signs of change inside our market.  I've poured over numbers looking for breaks in the pattern.  For a brief spell at the end of summer into early fall, things did slow down.  The number of showings and offers dwindled and, for a moment, it felt like our market was shifting.

But based on the first 14 days of 2016, it appears that was just an operational pause, not a shift.

To start the year, buyers are coming out swinging… and if you want to buy a house, you had better be prepared to compete, especially below $400k.

With a net population gain of 101,000 last year, about 270 people a day moved to Colorado in 2015.  And they all need a place to live.