DENVER | Main Development Thread #7

[TakeFive]

The Good News is there is Good Momentum

Momentum
according to Merriam-Webster:

• the strength or force that something has when it is moving
• the strength or force that allows something to continue or to grow stronger or faster as time passes

I've mentioned before that while hardly shocking this is awesome.

Originally Posted by rds70

Per the Denver Business Journal, 1900 Lawrence has secured construction loans:

With construction loans in place there's no turning back.

Still miles to go before....

Originally Posted by Arapahoe

They've started demolishing the main Greyhound station structure after pausing for the holidays. At this rate, it looks like it will be gone this month.

but you have to believe this will move forward to construction. Whether they phase construction or build out the whole block will be interesting to see. The key here is the location. As developers have indicated there's never a bad time to build when you've got a great location.

My crystal ball says:

that aside from the above and anything else that breaks ground this year that construction of commercial office space will come to a screeching halt (not counting any build-to-suit or preleased projects). Similarly, aside from the Marriott on 14th street, I suspect construction of new hotels will disappear.

Residential construction could continue apace near the city center so long as they are economically viable .

Obviously I foresee the economy rolling over at some point. To what degree is anybody's guess.

[laniroj]

Originally Posted by twister244

This is crazy.......

https://www.westword.com/news/denver...pdate-13197594

It is crazy, but not surprising. Mounds and decades of data supporting this trend...lots of job production, in-migration, and population growth accompanied by very little housing production.

A simple plan to solve things like housing below...but it involves offending many, many people who are typically older, white, wealthy, and liberal. Maybe that's not PC, but it sure is true.

https://www.theatlantic.com/ideas/ar...h-care/621221/

[laniroj]

Originally Posted by TakeFive

...Things can easily change and there's a lot of uncertainty with the economy. But, there's still a lot of 'helicopter' money being inputted into the economy so it's always tricky to make predictions. I do expect the 'helicopter' money to lessen going forward and with inflation it won't go as far...

If I am interpreting helicopter money correctly, I'd generally say helicopter money isn't affected by inflation.

Originally Posted by TakeFive

My best guess is that real estate will cool off some over the next year - at least in Denver but we'll see.

Generational housing shortage. My prediction is housing doesn't get solved or become more affordable in desireable places until boomers die off en masse and leave large homes to their gen x, millennial, and zoomer offspring.

[TakeFive]

Originally Posted by laniroj

If I am interpreting helicopter money correctly, I'd generally say helicopter money isn't affected by inflation.

Helicopter money is essentially government deficit spending but really it's excessive deficit spending. It would also include moves made by the Fed to grease the liquidity wheels - like they did when the Pandemic hit. The more $'s that are chasing goods the more likely that the cost of goods goes higher so (too much) helicopter money creates inflation.

To be fair, initial inflation resulted form the Pandemic created supply-chain problems which is ongoing. When the pandemic arrived providers cut their estimates for demand going forward when in reality demand ended up exceeding all projections by a country mile. The other supply-chain issue was China (for example) cutting back on manufacturing as they tried to contain the coronavirus from spreading.

So the perfect storm was a constipated supply chain along with 'helicopter' money chasing goods (and services) that weren't available.


Same ole song, different verse.

Originally Posted by laniroj

Generational housing shortage. My prediction is housing doesn't get solved or become more affordable in desireable places until boomers die off en masse and leave large homes to their gen x, millennial, and zoomer offspring.

So you're saying affordability will continue to be a problem just as it has always been? I'm sure you are correct.

EDIT:

Originally Posted by laniroj

It is crazy, but not surprising. Mounds and decades of data supporting this trend...lots of job production, in-migration, and population growth accompanied by very little housing production.

A simple plan to solve things like housing below...but it involves offending many, many people who are typically older, white, wealthy, and liberal. Maybe that's not PC, but it sure is true.

https://www.theatlantic.com/ideas/ar...h-care/621221/

Interesting read, sort of.

But consider the source; consider how he loves to 'throw everything against the wall"; consider that nowadays everybody is a critic; it's always easy to be a Monday Morning Quarterback.

Bottom Line:

Article is way too far off the beaten path to expound on here but I'm not a fan of geeky pieces that totally ignore the genius of 'free markets.'

Food for thought? Okay fine.

[laniroj]

[QUOTE=TakeFive;9503469]...So you're saying affordability will continue to be a problem just as it has always been? I'm sure you are correct.[QUOTE=TakeFive;9503469]

Housing affordability has not always been a problem and in fact, it wasn't generally ever a problem for you (if I'm guesstimating your age right). It has been a problem since the 1990s in coastal cities, became a problem in non-coastal interior cities during the 2010's, and spread to more rural, secondary and even some tertiary markets with Covid.

Originally Posted by TakeFive

..Interesting read, sort of.

But consider the source; consider how he loves to 'throw everything against the wall"; consider that nowadays everybody is a critic; it's always easy to be a Monday Morning Quarterback.

Bottom Line:

Article is way too far off the beaten path to expound on here but I'm not a fan of geeky pieces that totally ignore the genius of 'free markets.'

Food for thought? Okay fine.

Ae you against throwing everything at the wall to see what sticks? Seems to me that's the very definition of free markets. Unfortunately, our markets, housing in particular, are nowhere close to being free. What we're doing now is having disastrous effects on tens, nay, a hundred twenty million people or so in this country.

[Arapahoe]

Originally Posted by SirLucasTheGreat

I was just looking through ePermits and I noticed this project at 13th and Cherokee. It is a 17 story apartment that is making its way through design review. It is interesting how granular things become on purely aesthetic matters, like how thick the coats of of stucco must be applied. Here's a photo. This is one of my most hated parking lots so I'll be happy to see it go:

nice balconies -- not caves. lol

[TakeFive]

Housing affordability has not always been a problem and in fact, it wasn't generally ever a problem for you (if I'm guesstimating your age right). It has been a problem since the 1990s in coastal cities, became a problem in non-coastal interior cities during the 2010's, and spread to more rural, secondary and even some tertiary markets with Covid.

Ae you against throwing everything at the wall to see what sticks? Seems to me that's the very definition of free markets. Unfortunately, our markets, housing in particular, are nowhere close to being free. What we're doing now is having disastrous effects on tens, nay, a hundred twenty million people or so in this country.

This sounds like one of those "free speech" confusions. Ofc, he's entitled to say whatever he wants just as I'm entitled to suggest how pointless his points are.

When you bring up 'boomers' for example you're talking about Single Family Home ownership and presumably in specific areas. It reminds me of a song by John Lennon from 1964: "Here we go again" and I promise you that even in 1964 there were people who wanted to buy homes in neighborhoods they couldn't afford.

But it's different now right? And I'd agree; it's always different.

Anyway you have your view on affordability which is different from mine. I don't automatically think of singe family home ownership, let alone in high valued neighborhoods. I think more to basic housing affordability. Btw, nobody has posted about new affordable projects like I have. But it's not generally a sexy development example.

[TakeFive]

Just what Denver Needs

Denver is considering rewriting its rezoning rules to incorporate ‘equity.’
Jan 13, 2022 By Kyle Harris - Denverite

For starters, 90% of new developments won’t be affected by this at all.

Then there's this:

Just like racial segregation was once a core value expressed through zoning code, equity and avoiding displacement are values city brass say they care about and want to put into code now.

Honestly, I have no clue what specific changes they're contemplating and the "Devil is always in the Details" but this sounds like a classic "Be careful what you ask for" and is likely to have negative "unintended consequences."

[bulldurhamer]

Originally Posted by twister244

This is crazy.......

https://www.westword.com/news/denver...pdate-13197594

there is current just one single residential property for sale in all of whittier and cole. this is fucking bonkers.

[TakeFive]

There are Simple and Real Life Reasons for how we 'got here'

Originally Posted by bulldurhamer

there is current just one single residential property for sale in all of whittier and cole. this is fucking bonkers.

Traditionally, for residential real estate, November thru January were the slowest months. Conventional wisdom was that the kids were back in school and owners didn't want people traipsing through their home over the holidays.

Relative to residential real estate the most tragic example of "Unintended Consequences" resulted from the 'good intentions' to protect condo buyers. This was a problem that was unique to Denver.

It's beneficial to understand the history as a contrast to the present.

Back in the late 1980's when the Denver metro economy was convulsing was a uniquely 'affordable' time. That's b/c lots of residents rushed to get out of Dodge leaving empty housing inventory everywhere but especially in newer suburbs. With HUD becoming the dominant owner they did one thing that was smart. They made it easy for 'first time buyers' to buy a home with as little as $500. down payment and b/c housing values were cut in half in many places, many could qualify.

One good reason why I favor neighborhood "preservation"

Going back to the 1990's it was neighborhoods south of Colfax and East of Broadway that served as 'anchors' for a devastated real estate market (in the central city). Wash Park, Cherry Creek, Bonnie Brae etc. Today, it's a much different landscape - to state the obvious

The 2000's

was a period of stabilization. In the central city there were a number of new condo projects. The Golden Triangle, City Park come to mind. There were issues with some of them.

The Nationalization of Real Estate Development

along with the Great Millennial Migration to urban centers allowed Denver to celebrate all of the 'Denver-Infill' that Denver has experienced. That part is wonderful.

But the Wall Street-fed developers were interested in one residential product: apartments. To their credit their instincts were spot on. As wong reminded us recently the "First Time Buyer" market was decimated by new 'hard-to-qualify' standards. Overnight we became a Rental Nation.

While the 'national' guys were only interested in building apartments it's reasonable to assume that some condos would have been built if not for the unique horrible risk (and insurance costs) specific to Denver. Eventually there were some isolated projects, especially with townhomes as they were not subject to the same risks.

The biggest factor for building new affordable housing is availability of Cheap Land

You can come up with whatever theory you wish but you'll never overcome natural market forces and they quit making land in the central city a long time ago and it is now anything but cheap.

This is why I'm a Big Fan of 'designated' affordable housing projects and Denver has done a very credible job with this specific segment.

[twister244]

Originally Posted by laniroj

It is crazy, but not surprising. Mounds and decades of data supporting this trend...lots of job production, in-migration, and population growth accompanied by very little housing production.

A simple plan to solve things like housing below...but it involves offending many, many people who are typically older, white, wealthy, and liberal. Maybe that's not PC, but it sure is true.

https://www.theatlantic.com/ideas/ar...h-care/621221/

It's still unacceptable in my opinion. Denver tipped into what I call "stupid expensive" territory over the course of 2020. At $700k, the only way you can afford a property like that is if you either make north of $200k a year, or are in a dual-income situation where both people make north of that. The only exception to this is if you put down a large enough down payment.

I don't know anyone in Denver that makes that kind of money. This is one of the factors that slowly drove me out of Denver. When I bought my condo in 2018, things were pricey, but not outrageous. That's all changed now as it feels like Denver is slowly becoming like Boulder where it's just going to be a big gated community for rich folks that can afford a three-quarter million dollar house.

[TakeFive]

An average price over $700,000 does not mean more affordable options are not available including Brand New homes

For Example

The Westerly Collection - from $379,500; 3 BR - 2.5 BA - 2 GR - 1,371 SQ FT




The Alpine Collection - from $416,500; 3 BR - 2.5 BA - 2 GR - 1,539 SQ FT




Painted Prairie - from $502,000; 3 - 4 Bd - 2 - 3 Ba - 2 Car - 1,382 sq ft and from $537,000; 3 - 5 Bd - 2.5 - 3.5 Ba - 2 Car - 2,301 sq ft

[CONative]

Originally Posted by twister244

It's still unacceptable in my opinion. Denver tipped into what I call "stupid expensive" territory over the course of 2020. At $700k, the only way you can afford a property like that is if you either make north of $200k a year, or are in a dual-income situation where both people make north of that. The only exception to this is if you put down a large enough down payment.

I don't know anyone in Denver that makes that kind of money. This is one of the factors that slowly drove me out of Denver. When I bought my condo in 2018, things were pricey, but not outrageous. That's all changed now as it feels like Denver is slowly becoming like Boulder where it's just going to be a big gated community for rich folks that can afford a three-quarter million dollar house.

This is a pretty decent exaggeration. Buying a house over 700k, you can make $130,000 - $150,000 as a single or dual income family and be just fine at a 3-5% down payment. This is assuming a 33% - 36% Debt-to-income ratio (which is lower than the largely accepted 45% these days) and some other monthly debt on top of that WITH mortgage insurance.

....and as someone else pointed out...you don't have to buy 700k+. There are a number of homes below that in the city of Denver and beyond.

[DenverInfill]

Two things to note:

$705,753 is the average price for a detached home in Denver. The median price is $599,990. When the domain of a data set is bounded on only one end, such as home prices, the median will always be a more accurate measure of central tendency than the mean (average) due to the presence of extreme values that pull the average away from the median. That's why you almost always see median used as a measure of central tendency for things like income, home prices, etc. and not average. The Westword reporter chose to use the average home price because, presumably, it's the bigger number and, therefore, more shocking.

Additionally, the $705,753 is for detached homes, which will always be more expensive than attached homes due to the inclusion of the value of the land that must be part of the price. According to the same report, the median price in Denver for an attached home, arguably a very reasonable choice for a first-time home buyer, is $381,500. And as the median, that means that half of the attached home prices in the metro area are less than $381,500. A lot less scary-sounding, eh?

[Sam Hill]

Most of us are urbanists who want to live in a walkable neighborhood. All such areas in Denver have become stupid expensive.

I’m looking for two bedrooms so I can have enough space to not have to live like a 20-year-old anymore. Every once in a while one pops up that’s less than $400k (I only make $100k per year so my options are very limited) and they’re virtually always condos, so now we have to tack on an HOA of $600-ish per month. With the HOA and mortgage insurance, now we’re well north of $2500 per month and I’m priced out.

Another thing we have to consider is that most of these precious few homes available are going to end up in a bidding war and sell for more than their listing price, and often to a cash buyer.

I have seen some places I can barely afford show up from time to time (I have my search limited to “Denver”) but they’re usually something like a tiny ranch house with bars on the windows in SW Denver or something out in the middle of nowhere like Green Valley Ranch.

I’m not interested in living out in the middle of nowhere where I have to rely on a car for simple tasks like grocery shopping. I’m a city person and will always be a city person. I’d rather move to some place like Chicago where the prices are still reasonable.

It seams some of the wealthy among us can’t “see” that there’s a housing crisis. Well trust me, there’s a housing crisis, and Denver is rapidly becoming a playground for the rich.

[wong21fr]

Originally Posted by Sam Hill

It seams some of the wealthy among us can’t “see” that there’s a housing crisis. Well trust me, there’s a housing crisis, and Denver is rapidly becoming a playground for the rich.

I don't think there's very many people who think there isn't a housing shortage in Denver. But the solution, to increase the supply of housing faster than demand, isn't going to happen overnight given the acute shortage that is already baked into the market and the aforementioned reasons (logistical, physical, and financial) that the number of housing starts isn't accelerating enough to close the gap.

It is likely that a partial fix to the solution is the generational wealth transfer of Boomers to their children- assuming they don't piss it all away.

As for myself, I moved out of the urban center and accepted that I may not be able to walk for daily errands but rather will have to hop on a bike- a mindset that does open up a lot more neighborhoods to consider. There's always that possibility.

[TakeFive]

Originally Posted by CONative

This is a pretty decent exaggeration. Buying a house over 700k, you can make $130,000 - $150,000 as a single or dual income family and be just fine at a 3-5% down payment. This is assuming a 33% - 36% Debt-to-income ratio (which is lower than the largely accepted 45% these days) and some other monthly debt on top of that WITH mortgage insurance.

That's a nice refresher (for me) for today's market.

Originally Posted by DenverInfill

Two things to note:
.........
And as the median, that means that half of the attached home prices in the metro area are less than $381,500. A lot less scary-sounding, eh?

Thanks! My brain no longer retains those clarifications.

Excellent context.
---------------------------

I recall when Taylor Morrison came to Denver that they would (initially) focus on entry-level product. There HQ is in Phx and they have over 20 different development sites at different price points. But since that was the cheapest offering (above) near DIA it made me curious.

Compared to $379K in Denver, Taylor Morrison's cheapest entry-level in Phx is $360K so little difference. For their entry-level SFH development which is in an average area (but not waaay out) prices start in the low $400K's. But prospective buyers are met by this:

Due to historically high demand for housing, Tierra Montana Discovery Collection is phasing releases to a limited number of home sites every few weeks. This new cadence helps to reduce the strain on our construction teams, trade partners and the supply chain, and allows us to maintain our high customer service standards. We appreciate your patience and understanding—and empathize with how competitive and fast-moving the current market is.

I don't think it's any different in Denver from what I've read.

Ofc, it's a different world down here with plenty of affordable land but construction costs can't vary all that much from one place to the next. Land costs would be the biggest variable but maybe not that much different considering costs of needed infrastructure.

[wong21fr]

Originally Posted by TakeFive

Ofc, it's a different world down here with plenty of affordable land but construction costs can't vary all that much from one place to the next. Land costs would be the biggest variable but maybe not that much different considering costs of needed infrastructure.

I still think that the difference between Phoenix and Denver is that Phoenix had more inventory cushion coming out of the Great Recession than Denver. Both metro's haven't kept up with population growth in terms of new starts (a trend that is national), Phoenix simply has more of a cushion before things get ugly. But, if current trends continue, Phoenix will also see a rapid appreciation increase as all those relocating Californians find the inventory isn't there.

[twister244]

Originally Posted by Sam Hill

Most of us are urbanists who want to live in a walkable neighborhood. All such areas in Denver have become stupid expensive.

I’m looking for two bedrooms so I can have enough space to not have to live like a 20-year-old anymore. Every once in a while one pops up that’s less than $400k (I only make $100k per year so my options are very limited) and they’re virtually always condos, so now we have to tack on an HOA of $600-ish per month. With the HOA and mortgage insurance, now we’re well north of $2500 per month and I’m priced out.

Another thing we have to consider is that most of these precious few homes available are going to end up in a bidding war and sell for more than their listing price, and often to a cash buyer.

I have seen some places I can barely afford show up from time to time (I have my search limited to “Denver”) but they’re usually something like a tiny ranch house with bars on the windows in SW Denver or something out in the middle of nowhere like Green Valley Ranch.

I’m not interested in living out in the middle of nowhere where I have to rely on a car for simple tasks like grocery shopping. I’m a city person and will always be a city person. I’d rather move to some place like Chicago where the prices are still reasonable.

It seams some of the wealthy among us can’t “see” that there’s a housing crisis. Well trust me, there’s a housing crisis, and Denver is rapidly becoming a playground for the rich.

Exactly. I just went under contract for a 2 bed / 2 bad new construction in Logan Square (Chicago) for $460. Top floor, new construction, and in a good part of the city. That same listing would be $575-$700 in Denver. Even if you look at the median price, $600k is still very expensive for most folks. Yes, you can find properties cheaper than this, but you begin making major sacrifices on quality and location.

[H. H. Holmes]

Originally Posted by twister244

It's still unacceptable in my opinion. Denver tipped into what I call "stupid expensive" territory over the course of 2020. At $700k, the only way you can afford a property like that is if you either make north of $200k a year, or are in a dual-income situation where both people make north of that. The only exception to this is if you put down a large enough down payment.

I don't know anyone in Denver that makes that kind of money. This is one of the factors that slowly drove me out of Denver. When I bought my condo in 2018, things were pricey, but not outrageous. That's all changed now as it feels like Denver is slowly becoming like Boulder where it's just going to be a big gated community for rich folks that can afford a three-quarter million dollar house.

The bolded is a great point - I don't either. I can assume there are plenty of people moving to Denver with remote (and high paying) jobs, but is that alone driving it? Denver salaries in my field certainly don't pay that well...certain sectors of tech or finance might, but what percentage of Denver's population is that? Are there a ton of millennials with trust funds? Is it mostly equity transfer from coastal markets that make this craziness possible?

The only person I know who bought a house in Denver proper did so in 2015, and now is making a pretty penny renting it out. I wish I'd tried to buy property back then, even a condo, but finances didn't allow it...I finally was about to pull the trigger when Covid hit, making things further out of reach. My current partner and I don't want to be house poor/ living way out on the plains in a generic tract neighborhood, so we're considering smaller western cities (maybe the Springs, maybe down in New Mexico), but it's sad that we can't hope to ever buy a home in our current neighborhood - in this city we've built a nice life with some wonderful friends.