Is A Real Estate Bubble in Colorado’s Immediate Future

Many of my real estate peers continue to bask in the glory of this continued bull market in Metro Denver. I understand this as both personally and professionally I too am frustrated with the lack of inventory; a marketplace which continues to show a demand side bias seemingly unabated.

Yes I have been accused of being a pessimist. As I advise I have been in this business for 20 plus years AND been a resident of the State of Colorado since 1984. Thus I have been through a few business cycles and was fortunate to purchase the home I just sold back in 1989 as Denver was coming out of a commodities influenced regional recession which was a catalyst for Denver’s now more diversified economy.

This morning, during my scan of the headlines a story came across the wires; this one relates to states with potential real estate bubbles. Posted on AOL Finance the article mentions 8 states in which a real estate bubble may be forming.

Per the article and quoted as follows it is important to understand “Today, most experts agree that, on a national level, we are not in a real estate bubble. The absence of nationwide or statewide housing bubbles doesn’t mean they’re not forming, however, or that they don’t already exist within some states on a more local level.”

The States mentioned in the article are California, Texas, Florida, Washington Tennessee, Colorado Oregon, and Nevada. On the national level due to changes in mortgage requirements and desires for home ownership we have witnessed income to house value ratios increase. Historically from 1950-2000, median home values have been roughly 2.2 times the median income. Today, that number is roughly 3.36 times higher, 50 percent higher than the historical average. Granted there are more choices concerning mortgage instruments and our society in general has collectively accepted the concept and use of leverage. We now know leverage and inflated valuations led to the most recent Great Recession. Unlike the Depression of the 1930’s which was particially caused by a bubble in tradable equities, The Great Recession began with a housing bubble as housing was and continues to be viewed as an investment vehicle and thus being leveraged.

Driving through Cherry Creek North and Downtown and seeing the cranes on the horizon coupled with the frenzied construction activity all along the Front Range from the Foothills to the Plains, I am starting to be concerned. A low-interest rate, high-demand environment must at some point correct, when is the question:

The following is excerpted from the AOL Finance article:

Colorado’s housing market is overvalued, according to Fitch Ratings. But why is overvaluation important to real estate bubbles?

People believe that the asset, often real estate, is going to become more and more valuable in the future. If it becomes more valuable because it produces more income, that is one thing,” said David Reiss, a real estate expert and law professor at Brooklyn Law School. But if it becomes more valuable just because people think it is going to become even more valuable, that is another. At some point, the merry go round stops and the current owners are left with an asset worth less than what they purchased it for.

In Colorado, home prices in major markets like Fort Collins and Boulder are not just overvalued, they’re more overvalued than they had been at their peak during the 2005-2006 housing bubble, hardly an encouraging sign. Making matters worse, incomes are failing to keep up with rising price.

Several Colorado metro areas are seeing price-to-income ratios above both the national level and their historic averages. The median home price in Denver and Fort Collins are roughly five-times the median income. In Boulder, the home price-to-income ratio is even higher at 6.6 and is more than 100 percent higher than the historic average.

To be clear, high home prices don’t necessarily equate to a bubble, said Jeff Shaffer of McKinley Partners, a real estate private equity firm. “A typical bubble starts with high prices causing capital to start flowing quickly into that space because of attractive returns. So high housing prices may spur a bubble down the road, especially in markets like Denver, where you see a lot of new home development in the pipeline to open up,” he said.

According to RealtyTrac, a real estate information company and an online marketplace for foreclosed and defaulted properties, Denver County has the nation’s lowest affordability index as of second quarter 2017, meaning it has the least affordable prices compared to historical averages. Adams County and Arapahoe County, both in the Denver metro area, also rank among the worst for housing affordability.

Personally I am more concerned about the Front Range versus the State of Colorado. Yes our resort communities are very dependent on real estate transactions for transfer taxes and so forth. However I am not seeing the frenzied activity west of the Continental Divide that I see on the Front Range. Thus if a bubble is forming, I believe it may be Front Range specific and while impacting the whole state if it bursts, the damage I believe will be most acute along the I-25 corridor from the Wyoming border to Pueblo.

April 2017 Statistics Are in the Books

While the news on the housing front continues to paint a rosy picture as we continue to be in a sellers market; statistically we may be entering a phase of normalicy concerning market conditions. While prices remain elevated and there is continued concern that average metro Denver incomes cannot keep up with the inflated housing market we are seeing signs of slowdowns concerning price appreciation and possibly an uptick in inventory coming to market.

Personally I enjoy looking at statistics. When combined with historical personal perspective i.e. lived through it there are insights and trends one may be able to extrapolate.

I was reviewing April 2017 market conditions:

In April 2017, there were 5,361 Active Listings in the metro area.

(Of note, the historical average # of listings in April is 15,710 based on statistics gathered between 1985 and 2016 also related usually the start of the Spring sales season).

Thus our average # of listings continues to be constrained especially when considering the increase of housing stock which has come on-line since the end of the great recession coupled with our population increase

Concerning sales prices:

The year-to-date average sales prices in April 2016 increased 6.05%.

In April 2015 that same statistic was 9.53%.

In April 2014 that same statistic was 12.9% (of note coming out of the recession).

Thus we are witnessing a slowdown in price appreciation (a good thing), slight increase in inventory (a good thing) and overall a potential plateau in the market.

Yes sales prices are stabilizing and getting closer to matching inflation and inventory is beginning to loosen HOWEVER couple this with the stock market at record highs, unemployment at record lows and no appreciable inflation or major interest rate hikes; we may be seeing signs of a housing slowdown in the metro area.

On the luxury side of the market while there have been some blockbuster sales of late, homes priced at $1M and over seem to be languishing on the market for longer periods coupled with price reductions. Granted some inventory came on market overpriced to start however price reductions are happening sooner and price cuts is more severe.

In my local Cherry Creek neighborhood which I admit is far from a barometer for the metro area the inventory of listings seems to be increasing and sales transactions are taking longer to close and usually after a price correction. Granted there has been a uptick in inventory south of 1st Avenue and much of the for sale inventory north of 1st Ave is east of Steele St. which some buyers consider less desirable yet the number of active listings continues to increase. As of this writing there were 41 active listings ranging from $215,000 to over $10M (of note both the lowest and highest price listings are condominiums).

Having been in the real estate brokerage business for a few decades now I am used to witnessing Metro Denver go through 5-7 year cycles concerning increased demand and then stability. While I do not believe we are in for a major correction, I do believe we will continue to see additional inventory come on-line and price appreciation slow to the inflation rate or a few ticks above which is the historic norm.

In the luxury market, which I track, I would be a little more concerned regarding price stability.

In the starter and move-up market baring a serious interest rate hike I am not concerned as demand will continue to outstrip supply. I would be hesitant concerning starter inventory in the exurbs as those markets are dependent on low fuel prices.

As I am advising clients at present:

Sellers: Consider putting on the market now as its low inventory and attractive interest rates.

Buyers: While rates are low, a good opportunity to lock in a fixed mortgage HOWEVER should consider waiting a few months to a year or two as inventory will continue to increase and while interest rates may tick up prices usually do the inverse.

Renters: Rents seem to be stabilizing and with the introduction of additional luxury inventory do not be surprised to see landlord concessions. Thus if in a rental consider resigning for another 6 months with an escape clause and if looking to rent, shop around and look for incentives to bring your net effective rent down.



Is NYC Real Estate a Predictor for Denver

Early this morning the 3rd Q 2016 real estate market update for New York City provided by Douglas Elliman (and old line firm in conjunction with Miller Samuel Real Estate Appraisers) and the news is somewhat sobering.

The report noted in 2015 there were bidding wars concerning Manhattan real estate, recently the trend seems to have reversed. According to the report during the same period in 2015, 31% of listings sold for above the asking price, in 2016 the percentage has dropped to 17.4%. Yet more insightful is the listing discounts rising from 2.2% of listings during the 3rdQ of 2015 to 2.9% during Q3 of 2016. Add to this an 8.2% increase in inventory.

I am the first to advise (and being licensed in NY and CO) NYC is a unique market and much of the excess inventory is segregated in the high-end of the market with new construction, a general reluctance on the part of foreign buyers concerned about the world economy and new federal rules concerning disclosure and tracking of funds concerning purchases over $3M.

While the mean price of an apartment in Manhattan is $1M+ which would buy a very nice residence in Denver, we may be seeing trends in the Denver market a few months behind New York.

Listings above $468K in the Denver market seem to be sitting on the market for longer periods. Of note $468K is the conforming loan limit in Metro Denver. For sale signs in the tony neighborhoods of County Club, Cherry Creek and Washington Park seem to be growing exponentially coupled with continued new construction as cranes dominate the skyline in Cherry Creek North. While new listings continue to come on the market with what some consider inflated prices, older listings continue to see downward price adjustments especially pronounced in the Highlands where there has been a glut of upscale luxury developments and the absorption rate seems to have slowed.

A trend we are witnessing in NYC and I believe in Denver as well is movement to the suburbs and within Denver proper to the outlying neighborhoods away from the central business district. While one may suggest in Metro Denver the expansion of rail is partially the catalyst the reality is affordability. The NYC suburbs continue to boom as buyers who have been priced out of the city look to the suburbs for affordable options. A similar pattern is taking hold in Denver.

While I am not clairvoyant I am concerned about the activity in central Denver. While we may be heading into  seasonal slowing; with continued low interest rates sales should be continuing unabated.

Historically when interest rates rise, prices for houses falls inversely i.e. less affordability. Denver at present is at record highs concerning pricing (beyond the highs reached in 2007 even factoring in inflation). While an immediate rate hike may in fact spur transaction activity, the longer term trend may be more troubling i.e. if interest rates continue to rise to combat future inflation, houses prices may rise to match inflation however will probably not exceed and underlying affordability will be challenged in the higher interest rate environment.



Metro Denver still in top cities for real estate appreciation

The newest Case-Shiller figures were released and as expected the year-over-year pace of home-resale price gains still led most others for percentage price gains. In real numbers, prices in April 2016 rose 9.5% from one year prior.  If you follow my blog you know 10% has been the average gain over the last few months when compared to one year prior.

Two cities surpassed Denver’s gain by small increments, Portland and Seattle. Of the 20 cities tracked the average gain year-over-year was 5.4%. What si more impressive and yet also possibly troubling is Denver is one of 7 cities with resale prices at an all-time high. The other cities are Dallas, Portland, San Francisco, Seattle, Charlotte and Boston.


As an active broker and in discussion with peers we have become a little bit concerned (and it may be a seasonal issue) of the following:

-Homes on the upper-end of the market i.e. above the FHA conventional loan amount (for Denver) of $458,850 seem to be lingering on the market for longer periods of time.

-We brokers are witnessing across the board price reductions in a few specific neighborhoods where inventory has increased exponentially versus true demand. Most of this inventory is oriented towards the luxury market.

-Potential over supply of deluxe and luxury rentals in hot neighborhoods including Cherry Creek and Downtown as well as select suburban communities which assumes the continued influx of residents proceeds unabated.

-Record low interest rates yet buyers still on the sidelines.

As a broker for 25+ years I have been though such cycles prior. We are in a goldilocks period of low inflation, low interest rates and increased supply. Yet there still seems to be a slow down in the upper segments of the market which may eventually trickle down to the larger overall market.

Metro Denver has a history of developing excess inventory during up-cycles. Coupled with the City and County of Denver desiring to increase density in established older neighborhoods there are concerns regarding quality-of-life, congestion and affordability.

With today’s news advising the Federal Reserve may begin to increase interest rates by year’s end we should see fence-sitters locking in historically low interest rates before the election. If interest rates do rise and buyers continue to sit on the side-lines we may have larger issues going into 2017.

Row House that Set the Tone for Modernism in Cherry Creek Hitting the Market

In the early 1980’s Denver was going through a similar boom cycle as we are witnessing at present. The driver, oil and natural resources. At the time 17th Street downtown was called “The Wall Street of the West” and Denver, Houston and Calgary were considered energy oriented cities.

In 1983 Sandy Treat of Summit Habitats took a risk and decided to build on speculation four(4) row houses on the 200 block of Harrison Street in Cherry Creek North. Multiple challenges were presented to the developer including a building lot that narrower than the standard 125′ depth, the east-side abutts Colorado Boulevard which is technically a Denver Parkway requiring an increased set-back, mature trees to be preserve and no alley access. However Sandy enlisted a fledging firm out of Miami, Arquitectonia to design the homes and secured then local architect John Carney as Colorado based licensed supervisor.

Arquitectonia was gaining prominence in the Miami area for their daring designs. Within the opening credits of Miami Vice, the condominium building with the cut-out square and spiral stairs (The Atlantis Condominiums) is one of their signature designs. Many of the fabulous homes in the series were designed by Arquitectonia bringing the design vernacular of Miami’s art-deco/moderne South Beach District to the mainstream. All of a sudden glass block, seafoam green and spiral stairs became all the rage in design circles.

Sandy knowing the principles of Arquitectonia desired their design skills for his initial project in Cherry Creek North. A project that to the present day still inspires architecture and design students to visit unannounced to see these homes up close and personal.

#266 Harrison is coming on the market for the first time since 1989 and only the second owner. Designed for the unique constraits of the urban in-fill lot, the structure enhances the site with large windows, over-height ceilings and an overall whimsical design not found in today’s cookie-cutter spec homes.

The residence has undergone a renovation by Bear Creek Design Group which retained the theme of the architecture yet enhanced the design for today’s desires including but not limited to removal of all brass, rebuilding window frames to withstand the harsh Colorado climate, new paint, carpeting, wood floors and other tasks to allow the next steward of the residence to enjoy for generations to come.

266 Harrison St Denver CO-MLS_Size-004-4-Living Room-2048x1536-72dpi

The residence is still unabashedly modern in tone from the glass block elements (a design element from South Beach) to the off-center fireplace (modernized with natural gas yet retaining the maroon chimney and gloss yellow tile log storage) to the replacement of the original Pozzi bay windows with a modern design respecting Colorado’s climate. The kitchen was redesigned removing the formica counters and laminate cabinets, replacing with slab granite, wood cabinets and stainless-steel Kitchen-Aid appliances. With 4 zones of hot water heat and a separate Central Air Conditioning system coupled with R-33 walls and R-36 ceilings, utility bills even during the coldest winters rarely exceeds $100.

The residence is for those who do NOT desire the conventional. It is perfect for entertaining yet also for everyday living as the private residence rooms  (1st and 3rd floors) are separated from the public rooms. The present seller is an art collector; the home has been a showcase for artists including the late Mark Travis, Gary Sweeney (the artist responsible for America, Why I Love Her at Denver International AirportMatt O’Neill and others. Those who desire an attached garage are in luck as the residence offers a just shy of 400 SF 2-car garage with additional driveway parking, a rarity in the neighborhood.

With two(2) bedrooms and two(2) bathrooms within 1,780 SF the perfect condo alternative and no HOA dues. As a row house each unit also has an individual lot ownership. For more information visit:

Full disclosure, I am the owner and seller of the residence.



Luxury Housing Market Worldwide Losing Steam

A few days ago I opined on my concern about the Denver luxury housing market. Granted my observations are anecdotal i.e. speaking with peers, eyeballing and looking at statistics including new listings versus those under contract and closed.

Well it seems the issues are worldwide. In yesterday’s Wall Street Journal there was an article about luxury home sellers dropping their asking prices. Granted, Denver does not have many listings in the $5M and up range, however our high-end market is witnessing an increase of listings.

The City of London, one of the most sought after markets of investors worldwide looking to shelter their Yuan, Ruble

s, Rand, Rupee’s and other currencies is also witnessing a slump in the upper echelons of the market. The following article from Bloomberg illustrates this as developers are offering 20% discounts for bulk purchases.

I also work in the New York City marketplace and I have noticed the upper-end of the market senses nervousness. Granted with the average sale in Manhattan hitting $1.7M, the upper-end is truly upper however most new developments are courting the deluxe and luxury buyer yet inventory seems to be providing a glut in the market as demand softens.

Denver is a unique market. We are NOT a world capital city. Our housing market usually does not gyrate the way some similar post-war city markets have including Las Vegas and Phoenix. We have a very stable employment base, a diversified economy and an enviable lifestyle. However we cannot assume events in other markets will not impact our local and regional marketplace.

Again time will tell and I am not suggesting we need to buckle up as the downturn is coming. Instead I hope some rationality comes back to the market and we avoid the snowball effect of increased inventory leading to a glut along all price-points.

Is there a Glut in the Denver Metro Luxury Housing Market

While stories abound concerning newer deluxe and luxury rentals starting to offer incentives to fill their units, little has been mentioned about the ownership market.

If you have driven through Cherry Creek, Washington Park East, Hilltop or Country Club you may have noticed the proliferation of real estate brokerage signs advising homes for sale. Granted we are entering the Spring season which is always a period of increased listings. However for fun I ran some statistical analysis based on our multi-list system.

At present in the Metro Area as of April 8th, 2016 there is 10,934 homes on the market. Breaking down the market by deluxe and luxury price segments for the metro area and separately the City and County of Denver:

$1,000,000+ = 1,400 Homes of which 221 are located within City of Denver

$750,000+ = 2,424 Homes of which 366 are located within City of Denver

$500,000+ = 4,651 Homes of which 740 are located within the City of Denver

Based on the above the luxury market is truly spread across the metro area with the City and County of Denver accounting for approx. 16% of the deluxe and luxury inventory on the market (a percentage I would assumed was higher as the Central City is generally the most expensive PSF real estate however the C&C of Denver does include outlying suburban markets including Green Valley Ranch and Bear Valley).

My concern is approx. 44% of the inventory on the market at present is asking over $500,000. While this number would be considered low for coastal markets, I am concerned as the average income in Metro Denver would translate to a home affordability in the mid $300’s.

Having been through multiple housing cycles during my 30+ years as a resident in Denver historically the deluxe and luxury market is the first to show signs of fatigue, a potential over-bought market, signs of weakness ahead i.e. an increase in inventory and days on the market.

While I am not expecting a serious downturn or correction I believe the deluxe and luxury market is advising us the rampant run-up in prices may be receding. I personally am seeing more listings in Cherry Creek North that last year at this time would have come on the market at $1M+ being presented at more realistic pricing. I am also witnessing a glut of larger homes in Denver’s Hilltop, Washington Park East and Country Club neighborhoods hitting the market.

Yet macro market fundamentals have not changed i.e. the stock market while running sideways seems stable, interest rates continue at historic lows and unemployment rates continue to drop. On a macro level Denver now has the lowest office vacancy rate since 1990 and our unemployment rate is the envy of may rust-belt cities.

Thus something is happening in the market and only time will tell. However if a client asks me to predict the next few months, my advice would be unless you truly love the residence, plan to reside in it for a minimum 3-5 years or its just so attractively priced, my view is sit on the sidelines if you are able.

I will be interested to look at this post one year from today.



Spring Thaw is in the Air

Wow what a difference a few days makes. Within the last 7 days, 1,395 properties went under contract in the metro area. During the same week 939 properties sold and closed and  there were 735 new listings. In summation, it is still a seller’s market based on inventory and activity.

As I work in the deluxe and luxury market I am seeing some signals that the weakness in the upper-end may be abating OR sellers are becoming more realistic. In Cherry Creek North (I consider 1st Avenue on the south, 6th Avenue on the north, University Boulevard on the West and Colorado Boulevard on the East as boundaries) I noticed listings on the market asking under $1M seem to be generating activity and going under contract.

For fun I ran an informational statistical analysis. In the beginning of January 2016 the average listing in Cherry Creek North was asking $480 PSF above grade. This morning the average asking above grade is $414 PSF. I assume some residences have sold, other listings have been withdrawn or expired. However I believe more telling; listings coming on the market in the last two months have been priced more realistically and many under $1M thus generating additional activity and demand.

While some of my peers may begin to panic, this is the sign of a healthy marketplace or as I suggest coming back to reality. At $480+ PSF one may suggest a bubble was forming. Instead we are seeing a sense of equilibrium heading back into the marketplace. Yes, Cherry Creek North is a unique niche of the market and accounts for a minuscule part of the overall metro area HOWEVER from experience I look to the luxury market to read the tea leaves concerning the overall metro area.

Granted this is far from scientific; however the upper and luxury markets do tend to mirror the economy. I personally know a few retail analysts on Wall Street who visit luxury retailers to gauge the overall activity within the bricks and mortar stores to assess economic health and psychological predictors i.e. spending on attainable luxury suggests an overall positive view of future economic activity.

In speaking with a mortgage lender over lunch this past week; we are both market watchers and agreed at present the market seems to be moving towards equilibrium. With the number of houses on the market still oriented towards a seller’s market; prices may continue to rise yet at an abated rate closer to inflation (which continues to be minimal). Yet once we start seeing a spike in listings i.e. above 10,000 units in the metro area we may be in for a snowball effect with additional listings coming on the market and demand regressing. If this happens and we move into a buyer’s market coupled with potentially higher interest rates the end of our expansion era may happen.

Yet this is not a negative. For many years Denver Metro has been an attractive destination based on lifestyle factors i.e. employment opportunities, weather, recreation and until recently affodable housing. The recent influx of residents has truly strained some of our infrastructure which needs time to catch up coupled with houses prices exceeding average income and decreasing affordability. While positive for an existing homeowner, a challenge for the newly arrived or those who desire to relocate.

While I do not desire a hard downturn, I do wish for a more balanced market including options for first-time homebuyers not being banished to the exurbs for affordability (which only increases metro wide trafffic congestion and lessens air quality), availabile inventory for move-up and move down (empty-nester) buyers and additional options for our aging longer-term resident population.

As one client confided to me “we need to move into a more balanced market so my child can move from our basement to a home of their own”. And I say to that “Amen”.

Rental Concessions Price Drops Incentives Oh My

Should we be concerned about the health of the real estate market?

Anyone who follows my blog knows I have been “concerned” for a while. Of note I have been in the business for over two decades thus I have been through multiple market cycles.

Concerning the Rental Market it is no surprise we are beginning to see rental concessions i.e. free rent, lease signing bonuses, additional amenities and so forth. These concessions have been segregated to the deluxe and luxury segment of rental market, a segment that has witnessed a significant increase concerning inventory throughout the metro area. While concessions benefit the high-end renter in the short-term, the middle and lower-end of the market continue to experience demand far outstripping supply.

In addition I am witnessing a newer trend in the upper-end of the market. Those who may have considered placing their home on the market are now considering placing their home on the rental market, either long or short-term. The upper-end of the market i.e. over $500K is experiencing some fatigue as supply has increased and demand has decreased. Thus some sellers are reassessing their plans to sell and are considering renting their residences with the belief the market will again begin to increase at a later period.In the Cherry Creek North residential area adjacent to the Business Improvement District“For Rent” signs are sprouting up and beginning to crowd out or being placed adjacent to”For Sale” signs.

While the market may begin to uptick in the months to come I tend to be slightly pessimistic. Metro Denver has enjoyed an upswing for multiple years now. Over time markets do eventually correct. Historically housing prices matched the rate of inflation over the long-term. Since we have climbed out of the Great Recession our market has been expanding beyond national averages. Yes we are a pseudo sun-belt growth state with a continual influx of population however market forces eventually lead to corrections.

There is a fine line between demand and cost-of-living. While Metro Denver has enjoyed net migration since the oil bust of the last 1980’s, much of the attraction to Denver was affordable housing. Yes naysayers will advise the average home in Metro Denver is running about $330K in-line with average incomes yet most new inventory throughout the metro area is coming on line at much higher costs. The reasons are complex and varied, yet the end result is product becoming unaffordable to the average buyer.

Am I sounding an alarm? No. However I am advising clients to be cautious. I am finally seeing rationality return to the marketplace i.e. purchasing based on value versus a monthly payment and the realization that over the next 3-5 years equity appreciation may not be guaranteed as past performance is not necessarily indicative of future returns.

However I must advise, if priced correctly no matter what tier of the market, residences are in fact selling. Yet I am advising sellers to consider looking at prices from one year ago versus the last six months. While spring is usually a period of increased sales and activity, having witnessed longer days on market especially at the upper-end of the market, usually a harbinger of trends to come, thus tread carefully and with proper guidance.

Is the rental market moving towards equalibrium

To be honest I have no idea. However according to The Denver Post in an article titled Rising Vacancy Rates Signal a Shift in Metro Denver Apartment Market  there has been a surge concerning vacancies. While this is not to be unexpected due to the massive supply having come on line in recent months, those like myself with some history in Denver are reading the tea leaves and the word pessimism keeps forming.

Denver real estate is not immune to boom and bust cycles. Since moving here in 1984 I have been through three (3) cycles of the market. What concerns me about this newest cycle is the following:

  1. Apartments (rental and condo) being constructed throughout the metro area based on pro-formas targeting deluxe and luxury market which is truly a finite market.
  2. Asking rents and PSF prices sans correlation to average income in the metro area.
  3. Assumption that demand will continue to outstrip supply (sorry folks we are not in New York or San Francisco).
  4. Increased Density in a marketplace which generally values personal indoor and outdoor space.
  5. Apartments with common area amenities while skimping on size; while attractive to millennials, guess what, millennials do age and their desires change.

Such cycles are old news. I still remember when Parkway Center and Uptown Village came on the market inclusive of rental incentives. For some perspective during the summer of 1987 (yes almost 30 yrs ago), I worked in downtown Denver for the summer while attending CU Boulder during the school year. I was able to rent an apartment at One Denver Place, a one bedroom on the 25th floor (unit #2507) with an unobstructed view of downtown, including parking and utilities. With my rental furniture bill, the monthly was approx. $500.00 which at the time was considered slightly above market. When I graduated CU and moved to Denver full-time my first apartment, an expansive one bedroom with an enclosed sun room at 900 Lafayette was a whopping $400/month. During these times there was a general glut of rentals on the market and rents were in line with average incomes.

Even in the early 1990’s as Denver began to climb out of the energy sector recession one was able to purchase units at The Barclay Towers downtown for $50K including parking and either mountain or city views coupled with below market financing provided by the sponsor/developer. Granted during this time LoDo was in its infancy, the loft trend had yet to gain traction and the Platte Valley was literally a dust-bowl, how times have changed.

Granted between natural inflation, an expanding population (yes folks even with the snow we are considered pseudo sun-belt) and other factors it is natural for prices to increase and trust me I look back and concerning some real estate purchases say to myself “Could Have, Should Have and Didn’t”. While hindsight is truly 20/20, history is known to repeat itself as we rarely learn our lessons.

With the many apartments and condos still to come on-line in 2016 and beyond (just look at the skyline of Cherry Creek North and west of the Denver Country Club) do not be surprised to see developers providing incentives and other marketing perks to increase occupancy.

As a broker working in the deluxe and luxury market niche I understand these clients are as mentioned are a finite resource. There are only so many out-of-state buyers and mountain residents  looking to drop $1M+ on a pied-a-terre condo in Cherry Creek North or $2,000+/month for a Manhattan sized apartment in downtown or Cherry Creek.

Looking at the macro picture long-term I am not as concerned about absorption. As baby-boomers age, condos and multi-family maintenance-free living becomes more attractive. Denver will always attract the youngest and brightest due to lifestyle, climate and an overall entrepreneurial orientation. However for the immediate future i.e. 1-3 years, I personally am a little concerned. If I were bringing such product out of the ground over the next 1-3 years I would be considering contingency plans from price correction to financing concessions to rental incentives to owner will carry.