Households excluded from the Denver metropolitan space housing market

It’s no surprise that local families are frustrated and burned out in the current housing market as economist Elliot Eisenberg says Colorado has a “California problem.”

In January, Eisenberg of compared the Colorado housing market to a car driving on the freeway. Prior to the 2019 pandemic, all signs were stable and cruise control was set to 65 mph. In 2020, it slowed to around 25 mph. In 2021, the market got out of hand, reaching 95 mph.

There are several factors that are contributing to current market conditions, but primarily it’s the “California problem,” Eisenberg said.

“The California problem stayed in California for a long time,” said Eisenberg. “But now it’s coming to Colorado while the people of California are saying, ‘Hell with that.’ Housing prices are too high, taxes are too high, the cost of living is ridiculous. You jump off the ship and drive to Denver. “

The problem, Eisenberg said, is that Colorado has already lagged behind building enough homes. If you add an ever-growing population, the market becomes a problem, he said.

According to the Denver Metro Real Estate Market Trends Report for July, the population of Colorado grew by approximately 50,000 people between July 2019 and July 2020. From 2010 to 2020, the state grew by approximately 760,000 people, the eighth largest growth rate in the United States

Jill Schafer, a member of the Denver Metro Association of Realtors (DMAR) and agent for Kentwood Real Estate, said there is an incredible shortage of inventory in the metropolitan Denver 11-county market that includes Adams, Arapahoe, Boulder, Broomfield, Clear Creek, Denver, Douglas, Elbert, Gilpin, Jefferson, and Park Counties.

Schafer said as the population grew, local families were being forced “to drive until they find something they can afford”. Schafer explained a ripple effect using her son as an example. He and his family could no longer afford the increased cost of owning a home in Denver, which meant they had to head south. He was lucky to end up in Castle Rock, Schäfer said, but by the time he moved in his home value was up tens of thousands of dollars.

Shawn D., who requested not to use his last name for job reasons, said his family of five currently live in a rental home on the Highlands Ranch. Shawn said the “insane” housing market along the Front Range made him and his wife question their move from Florida to Colorado two years ago.

Shawn said they sold their Florida home for $ 280,000, which made him feel like he had a good down payment and was moving to Colorado. Instead, they were faced with one disappointment after another. Shawn described one market where they are on waiting lists for new housing developments that are only becoming a lost cause.

Shawn, who works in downtown Denver when he’s not working remotely, wanted to shop at the Highlands Ranch. When that got too difficult, they drove around everywhere. Shawn said they made offers on homes in Castle Rock, Evergreen, and everywhere else in the Denver metropolitan area. They even thought of houses in Bailey that were also overpriced, he said.

Adrian Espinoza, a real estate agent for Coldwell Banker in Lakewood, said inventory is the biggest concern for customers looking for a first home or families and couples looking to upgrade.

Espinoza said there are 5,000 homes for sale across the Front Range on any given day. In a normal market there should be between 20,000 and 30,000 entries. The lack of inventory reduces the options for customers and drives up prices.

In January, DMAR estimated that there were more than 24,000 active entries along the Front Range. In July just over 3,000 apartments were for sale.

A Zillow report estimates that property values ​​along the Front Range have increased by an average of 20% year-over-year. The average home price in Douglas County is $ 656,281, up 20.1% from 2020. In Jefferson County, the average home price is $ 584,544, up 21.8%. Arapahoe County has an average home price of $ 490,501, up 16.3%.

Espinoza said the problem with the reports listing average house prices, which appear reasonable, is that there aren’t enough stocks to keep these numbers up. In Castle Rock alone, Espinoza said homes are getting so overwhelmed and fast that there are few options in the $ 600,000 range.

Espinoza is representing Courtnee Lamb at Castle Rock. Trying to sell their current family home to move into a larger home with additional property has been a nightmare, Lamb said.

“We put our house up for sale and it will be on the market in two weeks,” she said. “Nobody expected that, that is, when we make emergency offers for houses that we want to buy. Sellers don’t want that because a larger cash offer will likely come later. “

Lamb described a market where she and her husband made an offer of $ 40,000 above the asking price one night, only to be outbid the next morning by someone who bids $ 80,000 above the asking price.

Lamb said they like Castle Rock and want to make sure their kids stay in the same school, but the housing market is driving them to look around Elizabeth, Franktown, and Colorado Springs.

Espinoza said he advises customers to wait if possible in hopes that something will become available in the area the families want to live in. But he admitted that the current market creates a lot of stress and frustration.

Shawn said one of the most frustrating things about finding a home is that families like his are no longer welcome in the greater Denver area.

Eisenberg said Shawn wasn’t wrong. Since Californians make a lot of money selling their homes and moving to Colorado, they have the money to spend.

“There are really rich people who come into a market where the prices are great, and it’s no big deal to spend an extra $ 80,000 above the asking price. It means nothing to them, ”he said.

As Californians keep moving to Colorado and other states, the housing market is changing, Eisenberg said. That means the pursuit of affordability means for current families to relocate to housing hunting further south in Pueblo or leave the state for Kansas or Idaho, he said.

Shawn said he signed another one-year lease on his rental home and noticed it saw a 3% increase. The next year Shawn said if his family can’t find a suitable home along the Front Range, they will leave the state.

“I definitely feel that my ability to grow and make this a long-term home has been priced at me,” he said. “If this market stays that way, people will leave. It’s unhealthy, unstable growth. “

Eisenberg said there are other factors that determine prices and inventory levels.

Eisenberg said citizens are fighting growth. They want to get more space and push for fewer housing estates. However, that means that not enough houses are being built to stabilize the market, he said.

“The Denver housing market has become one of the most expensive markets in the country,” said Eisenberg. “Politicians want to keep their jobs, so they don’t push for more housing. But the only solution is to build more houses. “

Schafer said another factor is that people stay in their homes. Families see the market and decide to stay there. Older couples who would normally downsize stay there because they can’t afford the rising cost of a townhouse or condo.

Eisenberg said that when the average cost of a townhouse or condo climbs above $ 350,000, older couples cannot shut down and single young professionals and couples cannot enter the buyers market.

In the end, Eisenberg said the reality is that Coloradans will be moving to places like Boise because it’s considered the new Denver.

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