DENVER | Main Development Thread #7

[TakeFive]

Mea Culpa

Originally Posted by mojiferous

Agent Orange - I was using the census data, it's the only source with a reliable methodology and 40+ years of data. I would lean towards industry data never being reliable and based on feels and marketing,

I knew the data as presented didn't make any sense so I assumed that it may be industry data; I just had never figured our where the kink was.

Originally Posted by mojiferous

TakeFive - 1972 IS a good point to compare data for housing and housing prices because housing prices were increasing but a lower rates through the late 70s

Only if you have an (political) agenda do you pick out the one data point that is a TOTAL outlier. But if you can understand this then you can easily pick out the craziness with political propaganda.

[TakeFive]

Originally Posted by twalm

Bashin' boomers is a popular pastime for millennials who have to deal with the cards they've been dealt. Spend some more time arounds millennials and the above comment will seem pretty tame.

I think people get rightfully annoyed by a generation who is still dictating policy that is out of touch.

So much has changed over the years and crazy changes just keep on happening. I emphasize with the younger among us but inflation and stagflation is also poison for Boomers.

Today, it's all about algorithms and software for the purpose of maximizing investments. Then consider the huge money flows through financial centers that make their decision based strictly on ROI or return on investments. They may not even know Denver or any of its neighborhoods. But at least Denver is well-thought of so that investment money keeps coming. That could change.

[TakeFive]

Originally Posted by mojiferous

And just looking at raw numbers is fine, but really what you want to look at is the number of housing units built compared to population increase and the number of housing units built per total population.

And the point here is (once again) to do a deeper dive into statistics presented and try to understand what the numbers are telling us.

mojiferous - I don't recall how long you've lived in Denver?

In the mid to late 1980's there were thousands and thousands and thousands of empty houses all over the metro are with nobody to live in them. That is what followed the O&G boom that went bust. For the City Center it was also about "see-through" office buildings - that were vacant.

Tell me how your statistics tell this story? This is a perfect example for how statistics don't talk; there's no context.

It took the metro area the better part of a decade to come back closer to equilibrium. I can recall selling a house in West Highlands in ~1992 and you could sense the increased selling activity with values finally starting to tick up (they had dropped by as much as 50%). The house I sold, which was quite nice, sold for ~$93,000.

So in 1990 we still had way too much housing inventory and somehow you think these dry numbers were relevant? To what?

[TakeFive]

You and your lousy statistics

Originally Posted by laniroj

To add onto Ken's post with data. From the US Census...as a disclaimer, I took the per decade population numbers from the Census and then annualized for the in-between years for the sake of time.

As I stated above 15 to 20 years following 1972, Denver had thousands of empty houses all over the metro area. Values dropped by an average of 50%. In more desirable areas the drop was less maybe 25% while in less desirable area the drop in values was as much as 75%. I certify that you could have bought whatever you wanted at a very affordable price.

By the year 2000, most of the housing values had recovered to what they were in 1985 and in some cases they were higher, like in nice areas or with new-builds. Then the Stock Market tech bust which started in ~1999 didn't hit Denver until ~2002 in the form of telecommunications and cable layoffs. But while that market was laying off workers other segments of the market in Denver were growing.

So from 2002 the Denver RE market did reasonably well with new-builds selling well while housing values remained quite affordable.

Then the Great Recession hit and housing values took a downward tilt but no biggie in Denver and then Denver started recovering nicely following 2010 but housing values remained affordable through at least the first half of the 2010's.

It is totally a false narrative to talk about new housing units prior to 2014.

It's rather vacuous to talk about building new units when there's thousands of empty units. Although new units did get built as the economy improved as many buyers wanted a new home and not a beat up foreclosure.

[mojiferous]

Originally Posted by TakeFive

mojiferous - I don't recall how long you've lived in Denver?

Since 1977 - and in Denver (and a bit of Lakewood)

Originally Posted by TakeFive

In the mid to late 1980's there were thousands and thousands and thousands of empty houses all over the metro are with nobody to live in them. That is what followed the O&G boom that went bust. For the City Center it was also about "see-through" office buildings - that were vacant.

Tell me how your statistics tell this story? This is a perfect example for how statistics don't talk; there's no context.

It took the metro area the better part of a decade to come back closer to equilibrium. I can recall selling a house in West Highlands in ~1992 and you could sense the increased selling activity with values finally starting to tick up (they had dropped by as much as 50%). The house I sold, which was quite nice, sold for ~$93,000.

So in 1990 we still had way too much housing inventory and somehow you think these dry numbers were relevant? To what?

It's in there - that's why the 80s have the lowest number of houses constructed and the smallest population increase. But your memories of it (and the data) also back up why we need so much more housing!

There was more housing, more office, and more industrial available than demand and it was super super cheap! Everything that made Denver attractive in the late 90s/early 2000s was because you could get warehouse space or an office or an apartment for next to nothing and it allowed breweries and art galleries and people of all economic backgrounds to thrive. Now the supply/demand curve has switched and there is so much more demand than supply. To buy a house now you have to enter a bidding war, the art galleries are moving to semi-abandoned parts of west Colfax, and breweries keep moving further and further away. And that's because of the numbers - sure the mid-80s were a hiccup, but that temporary trend in demand and slow population growth did not continue, but the housing construction never restarted - that's what you see in those dry numbers!

So with every year we move further and further away from 1983 and the oil crash and more and more people move here and we still don't build enough - sure it was great in 1990 and acceptable in 2000, but by 2010 it was getting expensive and now it is outrageous. The reason why later Gen X, Millennials, and Gen Z are so angry at boomers is because of the fact you were able to sell a house in West Highland in '92 for $93k but the same house now is probably nearing 8x as much but average wages have only gone up by a little over 2x in the same period. It's almost like the housing economy crashed in the 80s and we as a society just decided to not build aggressively again.

And the messaging and disinformation is so strong now that people blame this massive cost issue on the measly amount of new construction and want it to slow down even more. They see tent cities popping up around them and never think "oh, maybe the fact I fought against all density in my neighborhood is a factor in people not having homes". They see artists and local businesses being priced out and blame all the giant new apartment buildings, which might be the only things that are acting to lower prices! Even perfectly reasonable people like yourself are likely to go "but we are building so much already"... And for all these reasons it is important to look at the statistics and understand what is happening.

[coolmandan03]

Originally Posted by Fritzdude

If I were the Rockies - I'd take a serious look at replacing this lengthy parking lot with several layers of underground parking

I don't think you're grasping the cost of underground parking. Especially underground parking that is only used 81 games per year (and most weekdays that lot is mostly empty)

[mhays]

You're right mojiferous.

And they particularly don't get that new housing on at one price point will affect housing at all of the lower price points as well.

And that affordable housing happens without subsidy only when vacancies are high enough and plenty of faded units exist.

And that people who can't afford 600 sf with a parking space might actually benefit from 300 sf with no parking, vs. a friend's couch or the gutter.

[laniroj]

Originally Posted by mhays

You're right mojiferous.

And they particularly don't get that new housing on at one price point will affect housing at all of the lower price points as well.

And that affordable housing happens without subsidy only when vacancies are high enough and plenty of faded units exist.

And that people who can't afford 600 sf with a parking space might actually benefit from 300 sf with no parking, vs. a friend's couch or the gutter.

^THIS. Perspective is everything. Most people are emotional thinkers and see the world only from the lens of their personal experience, maybe one or two others as well. If, after folks look at the census data I linked to, they still disagree with my assessment that we are producing roughly 50% of the housing we used to, then I will concede I am an asshole. Why we are producing 50% less housing units is open debate, but it’s pretty hard to argue with static, methodologically sound census data that has been consistent for many decades - such a disagreement could even be considered ‘disinformation’ - one of those buzz words we hear so often in our country these days.

By the way, Census data absolutely does distinguish between single family and multifamily production and even distinguishes between mom/pop multifamily (5 units or less) and institutional multifamily (>5 units).

[TakeFive]

Very nicely stated!

Originally Posted by mojiferous

There was more housing, more office, and more industrial available than demand and it was super super cheap! Everything that made Denver attractive in the late 90s/early 2000s was because you could get warehouse space or an office or an apartment for next to nothing and it allowed breweries and art galleries and people of all economic backgrounds to thrive. Now the supply/demand curve has switched and there is so much more demand than supply.

And no the dry numbers didn't say a thing; rather you added the context that makes all the difference.

Prior to 2010 Denver either had too many housing units or things were in relative balance so the data is irrelevant. Even between 2010 and 2014 as we all enjoyed the increased housing construction in downtown, housing affordability remained relatively benign.

[TakeFive]

What is it you think I/we don't get?

Originally Posted by mhays

You're right mojiferous.

And they particularly don't get that new housing on at one price point will affect housing at all of the lower price points as well.

And that affordable housing happens without subsidy only when vacancies are high enough and plenty of faded units exist.

And that people who can't afford 600 sf with a parking space might actually benefit from 300 sf with no parking, vs. a friend's couch or the gutter.

When demand goes bonkers, increasing much faster than developers can keep up with then prices go up. What is surprising about this?

Also understand that since the Great Recession, developers and product result from financing from Wall Street. To a degree if they choose to not OVER build what can be done about that?
--------------------------

Most of the census data explains nothing; it's merely an historical accounting with no context

Originally Posted by laniroj

^THIS. Perspective is everything. Most people are emotional thinkers and see the world only from the lens of their personal experience, maybe one or two others as well.

[TakeFive]

It's possible things could change

Bye bye, San Francisco: The top 7 U.S. cities homebuyers are seeking to leave
Jul 24 2022 By Cheyenne DeVon via CNBC

From coast to coast, prospective homebuyers are on the hunt for affordability — even if it means leaving their city to find it.

A record number of potential U.S. homebuyers are seeking to relocate, according to a report published last week by real estate brokerage firm Redfin. The report ranked the cities Redfin users appeared most likely to try to leave — San Francisco, Los Angeles and New York topped the list.

Here are the top seven cities prospective homebuyers are seeking to leave, according to Redfin’s report:

1. San Francisco
2. Los Angeles
3. New York
4. Washington D.C.
5. Seattle
6. Boston
7. Detroit

Denver, Chicago and Minneapolis round out the list’s top 10.

Maybe some of the people who want to leave Seattle will come to Denver?

[Fritzdude]

Originally Posted by coolmandan03

I don't think you're grasping the cost of underground parking. Especially underground parking that is only used 81 games per year (and most weekdays that lot is mostly empty)

Let's look at average numbers. An underground garage costs approximately $25K per car space. Between Lot A and Lot B, there are around 3300 spaces aside from the current multi-level garage. That leaves about 10 blocks of simple ashpalt that is being used sparingly throughout the year. You could theoretically put these 3300 spaces below ground for around $82M and sell the land above it for development. Or put in incentives to 'share' the parking for residents.

$82M might seem like a lot, but for context, a full block sold for $27M last year in RiNo. Meanwhile, the Rockies are sitting on contiguous sea of 10 blocks that could be added to the market, which is booming. The math seems to work out. Imagine what one devloper, like East/West could do with 10 blocks in this area.

[bunt_q]

Originally Posted by Fritzdude

Let's look at average numbers. An underground garage costs approximately $25K per car space. Between Lot A and Lot B, there are around 3300 spaces aside from the current multi-level garage. That leaves about 10 blocks of simple ashpalt that is being used sparingly throughout the year. You could theoretically put these 3300 spaces below ground for around $82M and sell the land above it for development. Or put in incentives to 'share' the parking for residents.

$82M might seem like a lot, but for context, a full block sold for $27M last year in RiNo. Meanwhile, the Rockies are sitting on contiguous sea of 10 blocks that could be added to the market, which is booming. The math seems to work out. Imagine what one devloper, like East/West could do with 10 blocks in this area.

$25k for underground space? I’m seeing more than double that.

[Fritzdude]

Originally Posted by bunt_q

$25k for underground space? I’m seeing more than double that.

Yes, it would be more expensive if you have multiple levels. But excavating a single level underground ‘garage’ that achieves the efficiency of scale by doing a very large project would ultimately keep cost ratios lower. But, even taking your estimates with costs at double this amount, the math still works assuming you can get market rates for the land. Plus, the Rockies would continue to have a great asset for years to come, which will continue to bring in revenue. In addition to games, the need for private parking options will only increase.

[bunt_q]

Originally Posted by Fritzdude

Yes, it would be more expensive if you have multiple levels. But excavating a single level underground ‘garage’ that achieves the efficiency of scale by doing a very large project would ultimately keep cost ratios lower. But, even taking your estimates with costs at double this amount, the math still works assuming you can get market rates for the land. Plus, the Rockies would continue to have a great asset for years to come, which will continue to bring in revenue. In addition to games, the need for private parking options will only increase.

Not really - we had to value engineer out a 12 acre one story underground garage. It doesn't scale downward in the way you would think. I bet it's still double. Multi-story I have recently seen $70k.

Edit: Why do we care about below ground anyways? The hassles of condominiumizing for development above are definitely not worth it. You could do a giant above-grade structure and free up land much more easily.

[EngiNerd]

Originally Posted by TakeFive

It's possible things could change

Bye bye, San Francisco: The top 7 U.S. cities homebuyers are seeking to leave
Jul 24 2022 By Cheyenne DeVon via CNBC

Maybe some of the people who want to leave Seattle will come to Denver?

Didn't we already establish before that this article and its so-called "data" is very much a "correlation doesn't equal causation" scenario? Someone searching to move doesn't not mean that it actually happens, they provide no backup data showing correlation between what percent of searches to relocate actually result in actual moves. Basically meaningless statistics leading to a clickbait article.

[EngiNerd]

Originally Posted by bunt_q

$25k for underground space? I’m seeing more than double that.

This, $50k is more the reality today...maybe a little bit of a discount from that if you built 10,000 spaces all at once, but then it doesn't account for what will be on the "lid" of the garage

[TakeFive]

Part One: It's too easy to talk past each other

Originally Posted by DenverInfill

You don't get it. From 2000 through 2007, Colorado averaged 44,653 new homes per year, which was meeting population growth. Then the Great Recession came and that average plummeted; meanwhile, Colorado's population kept on growing.

Here's a table I made using the housing building permit counts from the data source you linked to above, showing annual housing permits from 2000 through 2021 for Colorado, along with the annual difference from 44,000--the average from 2000 through 2007. As you can see, we are 188,000 homes short of maintaining that average.

I need to understand things; the why of things. So I went back to this post to remind of that time period.

The Re-awakening of downtown Denver

A) December of 2005 saw the Grand Opening of the Hyatt Regency Convention Center Hotel. This followed the doubling in size of the Convention but it was the completion of the hotel that allowed for bigger conventions to start booking in Denver.

B) In 2009, Kiewit Western Co. was selected as the design-build contractor for the transit project. Construction at Union Station began in 2010 and the Grand Opening in May of 2014 and commuter rail service arrived in 2016.

Perhaps just as important the ball for the Union Station project started rolling in 2001 and 2002 which meant the buzz around downtown sort of escalated as the decade went along.

The Great Recession ran from December of 2007 through June of 2009. It was created from the excesses of RE development.

[TakeFive]

Part Two

From your posted numbers the bottom in Denver for new housing was in 2009 while 2010 & 2011 were mildly better. Then things started picking up in 2012.

Then I found this population growth specific to Denver Metro.
This is interesting as it shows accelerating growth from 1990 - 2000 as Denver bounced back from its Great Recession.

Then I found FRED which indicates that the Denver population was virtually static for 2009 before then re-accelerating thereafter.

Urban versus Suburban

This is actually quite important since families who moved, transferred to Denver likely chose the suburbs and presumably (most) could qualify for a loan so the new home construction was able to fulfill this demand. Then assume the typical family of three and it doesn't take as many housing units as it would for Millennials moving downtown which were more likely one housing unit per one person.

There's other very important things to consider

The animal instincts of builders is they're happy to build to whatever the demand is. But the Great Recession left some notable scars. Likely many families who transferred to Denver rented; perhaps they couldn't sell the house they left behind; perhaps they left behind a foreclosure and couldn't qualify for a new home.

With respect to the suburbs there became a scarcity of buildable lots and entitled land for new development. Many things take lots of time and the approval process for new entitlement became constipated during the 2010's.

With respect to downtown as the Millennial migration to Denver accelerated developers failed to keep up with demand due to the runway needed to entitle and build new projects. Plus in the early years developers started with more modest-sized project b/c nobody knew or could project the future demand for how much growth would happen in downtown Denver

Obviously, it's a lot easier to say in hindsight what developers 'should' have done but that's not how markets work.

[mhays]

Buyers will always leave expensive cities. College grads move in and rent, then often move out when they want to buy. It's an endless cycle.

As for supply and demand imbalance, no it's not just developer lag. It's difficulties and costs baked into the system. Land prices are high due to insufficient zoned capacity. Entitlements are too onerous. And so on.

Also, fundamentally, the size and complexity of today's housing means a lot of wage hours by a lot of people. If they get living wages, stuff will be expensive. Foreign supply chains aren't so cheap or easy anymore.

If you want cheaper housing, you have to address the cost of new supply. Upzoning to spread land costs out would be a first step. Less square footage would be another (a personal choice, but heavily restricted by land use codes). A simpler, quicker, and certain entitlement process would be a third.