It’s plainly
evident that we are living in magical economic times in Denver. Soaring home prices, jobs aplenty, massive
positive migration and an elite place as one of America’s most vibrant, dynamic and economically flourishing cities.
And all of
that is true. For better or worse,
Denver has been discovered, and the Mile High City of today bears little
resemblance to the smaller, more affordable and much-easier-to-navigate city I fell in
love with back in 2005.
Growth has
it challenges, though, and we’ve documented them before. Traffic, air quality, lack of affordable
housing and a rapidly growing divide between rich and poor are all "big city issues" which Denver must now tackle.
While it
goes without saying that growth beats stagnation and prosperity beats
austerity, living in a region with 2.2% unemployment presents another challenge
– finding competent vendors to do work at reasonable prices.
There’s more
to this conversation than you might think, because truth is, after six solid
years of equity growth with total gains rapidly approaching $150 billion in the metro
area (or more than $50,000 per person!), there is totally unprecedented wealth
along Colorado’s Front Range.
If you own
real estate, you have equity. And that
means nearly two-thirds of the residents in the Metro Denver area are feeling
pretty good about things these days.
What that
translates to in the goods and services arena is demand… lots of demand.
Which means
if you want to hire a contractor, landscaper, roofer or simply get a radon
mitigation system installed in your home… you’re going to probably have to wait
a while before someone shows up, and if you’re
not careful, you’re going to pay way more than you expected.
Getting
vendors to do timely work at reasonable prices seems easy enough… but it’s
not.
Think of
landscapers. For years during the
economic downturn, landscaping companies saw almost zero demand for their
services. No homes were being built, no
one had equity, and in a grim economic environment the last thing homeowners struggling to stay current on a mortgage were going to do was spend money on planting trees or building a deck.
Today,
however, think of the abundance. According
to real estate research firm Hanley Woods, more than 12,000 single family detached homes
will break ground in the Denver metro area in 2017. That’s 12,000 homes that need plumbing,
electrical work, concrete foundations and driveways and, yes, landscaping.
So here’s
the skinny of it… there’s more work out there than most companies can handle,
and builders selling retail products under time-sensitive conditions go to the
front of the line. If you’re paying
$650,000 for a new home, does it make that much difference to the builder if
installing a new driveway costs $4,000 or $6,000? Probably not.
But if you’re a homeowner looking to replace a failing piece of concrete, there’s
sticker shock.
I recently
sold a home built in the 1970s that needed tuckpointing work on the brick exterior
and the chimney. Nothing extensive, just
patching some holes where the mortar had deteriorated over time and freshening up a few
areas on the south side of the home that had taken decades of direct sunlight.
My regular
tuckpointing company was scheduling more than six weeks out, which didn’t work
for this property… and so I began searching for other vendors. Long story short, the first company bid the
job at more than $2,800. The second
company, a two-person operation with solid online reviews and evidence of
insurance… said they could knock out the job in one day and bid $850.
That’s
absurd.
I recently
had a client who purchased a new home call me asking for a
landscaping referral. A maple tree which the builder had planed in his front yard had died and he wanted it replaced.
Landscaper number one bid $1,700… and landscaper number two bid $575.
Stories of
this nature are everywhere. When
contractors have more work than they know what to do with, they can price
inflate all they want and chances are they will find someone willing to pay
it.
Another buyer of
mine recently closed on a resale home which had the water heater replaced as part of the inspection negotiation. A
few days after he moved in, he noticed a valve was leaking and he asked for my help. We called the plumbing
company which installed the unit back out to fix it. Long story short, turns out the plumber
really wasn’t a plumber at all. He was a
bartender who had been hired by the plumber to help keep up with the overwhelming
demands of the business.
Needless to
say, we weren’t happy. I called the
owner of the company and had him send out another plumber - a real one - to fix the
valve. I’m assuming the bartender turned
plumber is installing another water heater with a leaky valve somewhere in the metro area as we speak.
The point is…
do your diligence. Check referrals. Double check your pricing. And realize that in a market as hot as
Denver, competent people are going to be in high demand.