DENVER | Main Development Thread #6

[seventwenty]

Originally Posted by seventwenty

Wow even zillow is calling Denver unaffordable.

And it's everywhere.

Originally Posted by Bloomberg

Americans living in rentals spent almost a third of their incomes on housing in the second quarter, the highest share in recent history.
Rental affordability has steadily worsened, according to a new report from Zillow, which tracked data going back to 1979. A renter making the median income in the U.S. spent 30.2 percent of her income on a median-priced apartment in the second quarter, compared with 29.5 percent a year earlier. The long-term average, from 1985 to 1999, was 24.4 percent.

While mortgages remain relatively affordable, landlords have been able to increase rents because demand for apartments remains strong. The U.S. homeownership rate fell to the lowest level in almost five decades in the second quarter, as strict lending standards and tight inventories keep many families in the rental market.

[bcp]

^ agreed that it's becoming more expensive in denver... but i'm just not sure how I can trust any conclusions that come from a long term average that leaves out the last 15 years.

[RyanD]

Originally Posted by seventwenty

And it's everywhere.

Business Journal just repeating Zillow, but it's spreading around:

Denver rent and mortgage costs called 'unaffordable'

Renting or buying a home in Denver is so expensive today, that it's being called "unaffordable" to live in by a real estate company.

Zillow today reported that Denver, Los Angeles, San Francisco, San Jose, and San Diego are all "unaffordable" for both renters and buyers.

That's because in Denver, it takes a whopping 35 percent of a person's monthly income to afford rent in the city, way above the national average of paying less than a quarter of monthly income for rent.

Buying a home? In Denver, it's forecasted that it will take 28 percent of your monthly income to pay for a mortgage, which is above the 15 percent figure that buyers should expect to pay, according to Zillow.

“Our research found that unaffordable rents are making it hard for people to save for a down payment and retirement, and that people whose rent is unaffordable are more likely to skip out on their own healthcare,” said Zillow Chief Economist Svenja Gudell, in a statement.

[bunt_q]

Good job Aurora for moving forward on a defect ordinance. Strength in numbers. Going to a very high profile case when it hits the courts, particularly if Lakewood has Aurora by its side. It's also a case that's going to make liberals look like clowns, unfortunately, even if they ultimately prevail and these ordinances are struck down. Anyways, still waiting for Denver to join the party.

[RyanD]

Originally Posted by bunt_q

Good job Aurora for moving forward on a defect ordinance. Strength in numbers. Going to a very high profile case when it hits the courts, particularly if Lakewood has Aurora by its side. It's also a case that's going to make liberals look like clowns, unfortunately, even if they ultimately prevail and these ordinances are struck down. Anyways, still waiting for Denver to join the party.

Aurora is bold. I can see awesome affordable condo stock rising there. Also... This is ridiculous (if you say this is a healthy market then you're definitely part of the problem):

Downtown apartment building boom

There are 45 times as many apartment units than for sale housing homes planned or underway in downtown Denver and surrounding neighborhoods, according to a report released on Tuesday.

There are 132 for-sale townhomes under construction in downtown and nearby neighborhoods, compared with 6,107 apartment units, according to the Downtown Denver Economic Update report released by the Downtown Denver Partnership,

Another way to look at it: Of the total 6,149 residential units in the pipeline, townhomes account for a mere 2.1 percent.

[seventwenty]

Originally Posted by bcp

^ agreed that it's becoming more expensive in denver... but i'm just not sure how I can trust any conclusions that come from a long term average that leaves out the last 15 years.

Well the graph right below that sentence looks like this:



There is a bottom in 1999. Things got more expensive after the 2008 crisis, and that is probably a factor of increasing rents and declining wages, among other things.

[bunt_q]

Originally Posted by RyanD

Aurora is bold. I can see awesome affordable condo stock rising there. Also... This is ridiculous (if you say this is a healthy market then you're definitely part of the problem):

Downtown apartment building boom

And those are townhomes - you can build a townhome because you don't need a condo association under state law - the common elements are addressed through simple party wall agreements. But townhomes can't solve the problem, they're just too expensive to develop. Good article.

[bunt_q]

Originally Posted by seventwenty

Well the graph right below that sentence looks like this:

Enter mhays to tell us that "spending 50% of your income on rent is completely normal."

[TakeFive]

Originally Posted by RyanD

Aurora is bold. I can see awesome affordable condo stock rising there. Also... This is ridiculous (if you say this is a healthy market then you're definitely part of the problem):

Downtown apartment building boom

You might want to give a quick read to my post on the previous page, 1st one up from the bottom.

No question we are in historic times. Over the decades there have been various cycles of course. Certainly this one is very unique.

First and foremost is the Millennials' lust for urban living which tends to be pricier to begin with and secondly has overloaded the demand for rentals in many/most cities. Denver is one of a few poster children.

Next is Denver's hyped appeal such that the whole metro area was caught with not enough new housing being created. CherryCreek articulated this very well couple of pages back.
The market does seem to finally be equalizing with still a boatload of new apartments under construction in the central city which could make a significant difference a year from now.

Looking ahead it's become apparent that Denver is now having great difficulty recreating new companies into the area. There does seem to be good organic growth though - aside from oil & gas.

[Denver]

Originally Posted by TakeFive

Looking ahead it's become apparent that Denver is now having great difficulty recreating new companies into the area. There does seem to be good organic growth though -aside from oil & gas.

What are you talking about. Great difficulty? Where are you getting this from and how is it apparent. Denver is not having a hard time recruiting companies. On the contrary, Denver is doing pretty well recruiting new companies.

Denver beat out a number of U.S. cities in courting ZenPayroll, will create 1000 jobs

How is this "great difficulty"?

[Denver]

Originally Posted by bunt_q

Good job Aurora for moving forward on a defect ordinance. Strength in numbers. Going to a very high profile case when it hits the courts, particularly if Lakewood has Aurora by its side. It's also a case that's going to make liberals look like clowns, unfortunately, even if they ultimately prevail and these ordinances are struck down. Anyways, still waiting for Denver to join the party.

The best part is that this happened in Morgan Carroll's backyard. I hope Coffman slams her on this during the election.

[bunt_q]

Originally Posted by TakeFive

Certainly this one is very unique.

First and foremost is the Millennials' lust for urban living which tends to be pricier to begin with and secondly has overloaded the demand for rentals in many/most cities. Denver is one of a few poster children.

How is this unique? I'd like to see some data. Because our average units-per-year under construction metro wide are not any higher now than they were in previous up-cycles, particularly when you account for us taking a few years off of new construction completely, which is quite unusual. But our pace of construction is not really off the charts. I get that most folks on here are blind to new construction unless it has a tower crane. But nothing that is occurring is so wildly off past boom cycles. Remember back when it was so bad we had growth control measures on the ballot? Or is everybody so new here that this is the first boom they've seen?

Two things are different. One, the concentration of apartments in central Denver. Two, the total lack of for-sale housing. And I am not sure these are unrelated... if you're going to pay a ton for renting, you might as well rent smack in the middle. But if for-sale housing was even an option for these same people, I think we'd see the development spread a little more widely. Not to say folks wouldn't still want to be urban. But I think some of the city-close "areas of change" would be picking up more than they are.

Originally Posted by Denver

The best part is that this happened in Morgan Carroll's backyard. I hope Coffman slams her on this during the election.

Agreed, but I also hope it is severe enough that it ends her political career once and for all. No lingering through a few losses the way Romanoff did. I wanted her humiliated on her first attempt and made untouchable.

[A-G]

I created a petition for repealing the construction defects law. If you support, please sign and distribute.

Colorado's construction defects law needs to be repealed. It has put an end to nearly all condo construction in the state. Under current law, as few as two condo owners can file a class-action lawsuit against the builder. That means that condo buildings are uninsurable. Builders don't want to risk getting sued and banks won't finance new condo construction. The only people who profit from the current arrangement are trial lawyers.

Condos play an important role in the residential real estate market. They are an important affordable housing option, and the entry level purchase for many homeowners. Because would be homeowners are priced out of condos, they are bidding up the price of apartments. Rents are skyrocketing. In August 2015, there were 45 times more apartments under construction near downtown Denver than for-sale housing. Rent now consumes 35% of the average resident's income, far above the historical average of around 23%.

Efforts to reform the law have repeatedly died in the Colorado State House. Sign this petition to and help make housing affordable again.

[rds70]

Originally Posted by BG918

Oh and if what I heard today is true 999 17th is actually going to get built.

A building permit application has been submitted to the city for the residential portion. 359 units

[TakeFive]

Originally Posted by Denver

What are you talking about. Great difficulty? Where are you getting this from and how is it apparent. Denver is not having a hard time recruiting companies. On the contrary, Denver is doing pretty well recruiting new companies.

How is this "great difficulty"?

Eh, I didn't say they were "O for the Ocean."
From the DBJ article by by Greg Avery:

ZenPayroll, which offers businesses automated payroll services, currently has 225 employees. It plans to hire 100 people for its new Denver office, located in downtown near the Union Station transportation hub, the company said.

The company is finalizing a lease for offices with space for nearly 500 employees, he said.

I hope they make their goals of some day having 500/1,000 employees. Zenifits, interestingly also from San Francisco moved to Scottsdale end of last year and expects to have 1,200 employees by the end of this year and has already executed a lease in Tempe for another 1,000 employees so certainly such success can happen. I'd say it's not typical though.

Not to repeat myself but from the recent Forbes ranking we have this:

“Our ability to qualify for many relocation projects has gone down, and we are limited to competing for the top 3-4% of projects in terms of wages paid,” says Metro Denver Economic Development Corp CEO Tom Clark...

Speaking of Metro Denver EDC, they used to track new companies and business development but they've changed. Similar but they now list positive business news in general HERE. ZenPayroll is the only company I noticed moving into Denver this year. Panasonic which was announced last year is still pending out by DIA. I wouldn't say Denver is having a stellar year with recruiting - yet.

All that said there is noticeable organic growth which is probably the best kind of growth to have. I did acknowledge that.

[TakeFive]

Originally Posted by bunt_q

How is this unique? I'd like to see some data.

Eh, Your post has its merits but methinks you might have read mine more closely. Plus you maybe didn't read CherryCreek's post which I also referenced.

One very unique quality of this cycle (in addition to the Millenial's desires already referenced) is this:
Historically real estate development especially housing has led past recoveries. Such development resulted (substantially) from "first time buyer" demand which then fed the whole move-up market. That has been virtually absent this cycle and it's huge. The reasons are many and previously discussed on the thread.

[TakeFive]

Originally Posted by rds70

A building permit application has been submitted to the city for the residential portion. 359 units

This is encouraging; Here's hoping.

They might as well join the party. There's still plenty of wine and cheese.
I'm guessing the units will be condo quality but regardless this does look like the type of project that would have great investor appeal.

Off topic: 11:30 AM and it's already 105 degrees outside on the way to 113/114. Likely a degree warmer tomorrow. Unusually high pressure overhead. Up until now it's been pretty nice, for a summer. I was out in it yesterday and it's strange but not that bad actually at least to run errands etc.

[bcp]

^ that's a pretty scary fundamental....high-end sales cannot fuel a recovery and long-term growth...

Originally Posted by seventwenty

Well the graph right below that sentence looks like this:



There is a bottom in 1999. Things got more expensive after the 2008 crisis, and that is probably a factor of increasing rents and declining wages, among other things.

based on above, anybody else see a correction coming?

[wong21fr]

Originally Posted by seventwenty

Well the graph right below that sentence looks like this:



There is a bottom in 1999. Things got more expensive after the 2008 crisis, and that is probably a factor of increasing rents and declining wages, among other things.

I would venture that declining real wages account for the lion's share of the increase in rent as share of income. Looking at the chart you can see that the last sustained decrease occurred during the late 1990's (an era of huge economic growth that actually saw real wage growth), the post 2005 decrease is likely strongly correlated with the MBS-binge and the rush to put anything with a pulse into a mortgage. A sustained economic growth period with real wage growth is likely the only event that would have a sustained downward pressure on the upward slope of this housing cost trend.

[bunt_q]

Originally Posted by TakeFive

Eh, Your post has its merits but methinks you might have read mine more closely. Plus you maybe didn't read CherryCreek's post which I also referenced.

One very unique quality of this cycle (in addition to the Millenial's desires already referenced) is this:
Historically real estate development especially housing has led past recoveries. Such development resulted (substantially) from "first time buyer" demand which then fed the whole move-up market. That has been virtually absent this cycle and it's huge. The reasons are many and previously discussed on the thread.

Oh I thought you were referring to a different post, my bad. That one was farther back.

Originally Posted by wong21fr

A sustained economic growth period with real wage growth is likely the only event that would have a sustained downward pressure on the upward slope of this housing cost trend.

I don't think that's true. Fluctuations, sure, but on that graph rents as a percentage of income didn't change from 1973 until 2000 - a period that also didn't see a lot of real wage growth. It seems to me that something has clearly changed since 2000, and I think a lot of it has to do with our approach to development. Nationwide, we've made it damn hard over the last decade and a half. At least in any of the areas where growth is needed. (I'd be curious to see that same graph broken out regionally - I wonder if it holds in, say Cleveland.)