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$512,250!?! Denver Home Prices Reaching New Highs

Denver Real Estate Market Snapshot - April 2018

$512,250!?! Yes, that’s exactly how we said it when we saw the median prices for single-family, detached homes. We surely thought it was a mistake in our computations, but just like Santa we checked it twice. Home prices have been climbing a proverbial 14er since January, where they’re up a whopping 15.1% from this time a year ago. Interest rates are trending up, but buyer demand is still strong with inventory trickling down to 1.2 months. The length of time it’s taking homes to sell took a dramatic dive down to 20 days, almost a week shorter than the previous month. 88 more homes sold in April compared with March, indicating demand is just waiting for new inventory to hit the market.

Denver Slot Home Crack Down Comes Too Late

Denver council outlaws slot homes after years of neighborhood outcry

Source: Jon Murray of the Denver Post

Denver Slot Home Crack Down Comes Too Late

Denver City Council unanimously approved zoning code changes preventing future development of sideways facing slot homes. The change has been a long time coming  for some Denver residents but it will only affect future building permit approvals. There are several projects still in the pipeline that will be grandfathered in before the new zoning takes place. The change would require new developments to orient the building toward the street connecting it to the neighborhood better. Berkley, Jefferson Park, and West Colfax have the highest concentration of slot homes in Denver. They say a picture is worth a thousand words, in this article there are great before and after satellite views showing how the neighborhood has changed.

 

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Is Denver's Popularity Waning? More Moving Out Than In

Is Denver’s Popularity Fading? More People Looking to Move out Than in

Source: Aldo Svaldi of the Denver Post

Is Denver's Popularity Waning? More Moving Out Than In

Denver’s popularity is in question for the first time in many years. After waves of people moved to the metro area in the last decade, the spark is starting to sizzle. Why? For many, it’s becoming too expensive and too crowded. Denver lead the way as the country rebounded from the Great Recession. Young workers flocked to Denver for job opportunities and recreation heaven. As the unemployment rate in the rest of the country has dropped, Denver’s luster is starting to fade. Median home prices are becoming out of reach, leaving natives and newcomers with thoughts of ditching Denver for greener pastures.

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Denver, Colorado Rental Rates Q1 2018

Some Much Needed Relief for Denver Renters

Some good news for Denver renters — the rental market appears to be cooling down a little bit! As we head into our peak rental season expect rental rates to remain close to the same or increase ever so slightly. The exception to this will be sought after, hot neighborhoods where people are willing to pay a premium for a high walk score.

Denver, Colorado Rental Rates Q1 2018

Denver two year look back for median rental rates.

The first quarter started out relatively flat compared to the sharp increase seen at the beginning of 2017. New apartments have steadily been hitting the Denver market, helping to slow the rent increases we’ve been accustomed to. As we get into prime leasing season (May – August) we would expect to see a very slight increase for three and four bedroom units, since new units of this size aren’t being built as frequently as their smaller counterparts. One and two bedroom rent will likely remain flat and could even show a small drop due to the new inventory hitting the market each month.

Denver Median Rental Rates by Bedroom Q1 2018

Median Denver Metro Area Rents ($)

As we look at median rental rates around the metro area, one neighborhood that sticks out is Union Station (LoDo). Why? The 1 year change was -0.9%, mainly due to the increased competition from new rental units hitting the market. The 5-year change was only 1.7% — proof that added density and inventory is what Denver needs to curb rising rents.

View map in larger screen here.

Note: Think of this map as a 30,000 feet view of the rental prices in Denver. You can click on each neighborhood for exact numbers and year-over-year statistics.
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Real Estate Investors Will Benefit From New Tax Law

Real Estate Investors Will Benefit From New Tax Law

Source: Jeff Johnson and Andrew Monette of Pinnacle Real Estate Advisors

Real Estate Investors Will Benefit From New Tax Law

Do you invest in real estate? If so, we have great news for you! The largest tax system overhaul in 30 years will benefit most real estate investors. Let’s shed some light on a few of the less apparent changes in the new tax code:

There will be no new restrictions on 1031 exchanges.

Unfamiliar with IRC Section 1031? It allows real estate investors to postpone paying taxes on gains, so long as those profits are reinvested into bundles containing property similar to the one they profited on. Keeping this section in place favors real estate investments over other opportunities.

Several changes were made to the way equipment and other improvements are depreciated.

For residential owners, nonaffixed appliances and furniture can be fully expensed in the first year. The same is now true for property that falls under MACRS with a life of 20 years or less, computer software, water utility property, and other qualified improvements. The last depreciation change the article mentions is the increased cap for immediate expensing of tangible personal property from $500,000 to $1,000,000.

A pass-through tax deduction, or bonus depreciation has been created.

This allows for sole proprietors and investors using pass-through entities to enjoy a 20% deduction on taxable income. A pass-through entity is one that allows investors to set up an entity to relieve liability of themselves, while “passing” their revenue through that entity to themselves before paying taxes at their personal rate.

As a result of the new tax code, the authors of this article predict a shift in investment from equities to real property both in the Denver market and Across the United States.

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How to Avoid Being Scammed on Your Next Rental

How to Avoid Being Scammed on Your Next Rental

Source: Sally Mamdooh of the Denver Channel

How to Avoid Being Scammed on Your Next Rental

While browsing listing sites for a rental property to call home, Stephanie and Matthew Leschen stumbled upon a Trulia listing they thought could be the one. A man claiming to be the listing agent sent the Leschen’s a security code to the home, and they went to tour the place by themselves. Several conversations and a $3,400 later, Matthew and Stephanie found out they were the victims of a rental scam.

Unfortunately, this is not the only instance of such a scam. Watch the video below to see the rest of the Leschen’s story, and incorporate our tips for avoiding a scam into your next search for a rental home.

 

Tips for avoiding a rental scam
Do your research.

Trulia, like many apartment listing services, is widely used and trusted. However, this does not prevent scammers from posing as real estate agents. View the listing agency’s website and verify their legitimacy by searching for reviews and testimonials from other independent sources.

Beware of agents who ask for money before they show you an apartment or home.

An “admission” cost for a showing or open house should be an immediate red flag.

Meet with a landlord or listing agent in person.

A legitimate agency will always be willing to send an agent or manager out to a property to meet with you.

Beware of unusually high fees or security deposits.

Application fees are commonplace in a competitive market. However, if you are asked to pay a security deposit that is several times higher than one month’s rent, or to pay fees that seem unreasonably high, this is cause for concern. A legitimate agency will clearly explain any and all deposits and fees for you.

 

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Expect Construction Costs in Denver to Continue to Rise

Source: Travis Hodge and Craig Kalman of JLL Multifamily Capital Markets

Expect construction costs in Denver to continue to rise

Every aspect of the cost of living is rising in Denver, including the costs of labor and material to build. Within the next year, we have almost $5.5 billion in projects that are set to start, including the DIA project and I-70 expansion. Because of the scarcity of subcontractors, framers, and builders, the cost of labor alone has doubled. There is good news for developers and investors though: most projects are still under today’s replacement cost. And surprisingly, a labor shortage is what could keep the market in equilibrium.

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Denver Real Estate Market Snapshot - March 2018

Interest Rates on the Rise

Denver Real Estate Market Snapshot - March 2018

Median home prices are still on the rise and it appears interest rates are starting to follow. In early February we started to see an abrupt increase in 30-year fixed interest rates. The Fed indicated there will likely be three rate hikes this year and they are starting to make good on their promise.

INTEREST RATES

Interest rates are slowly but surely making their way back up to 2013 rates. One thing to note are the peaks and valleys that happened in 2013. We will be anxiously watching for any repeated trends over the next 12 months. If rates do ease, I would expect to see a small surge in purchases for those trying to time interest rate movements. That wouldn’t be a welcome addition to the buyer demand we are currently seeing.

30-Year Fixed Rate Mortgages 2013-2018

Coming in hot at 4.4%, the current interest rate is at it’s highest since February 2014. This is a 0.24% increase from the interest rate in March 2017 (4.20%). That equates to an increase in the interest payment per month of 23 bucks per $100k borrowed.

30-Year Fixed Rate Mortgages Previous 12 Months - March 2018

But don’t worry, this is still incredibly low, especially when you compare it to the rates that the Baby Boomers bought their homes for — over 16%!

30-Year Fixed Rate Mortgages 1972-2018

AVERAGE DAYS ON MARKET

Average days on market is the same as it was this time last year. In Denver County, homes are currently on the market for an average of 26 days. In December it was 37, which is an indicator of a seasonal slowdown. But now, things are starting to pick up and we desperately need inventory. Good homes are being snatched up quickly and over list price. Like $40k over list price!

Average Days on Market | Denver County | March 2018

Comparing “apples to apples” the average days on market are tracking  the same or slightly downward for most counties, the exception being Broomfield.

Average Days on Market | Denver Metro Area | March 2018

 

INVENTORY

1.2 months of housing inventory. That’s what we currently have in Denver County. Just a reminder: 6 months of inventory is what our market needs to even out and we haven’t seen that much inventory in years.

Average Housing Inventory Denver Metro Counties March 2018

The amount of homes on the market have decreased by -0.7% since this time last year. In Denver County, 1,311 homes were listed and 1,109 homes sold this March. In March 2017, 1,482 homes were listed and 1,117 sold. It’s not that big of a difference but we need all the homes we can get!

Average Number of Homes for Sale in Denver County 2007-2018

MEDIAN PRICE RANGE

March saw the median sale price for all residential properties (attached + detached) in Denver hold steady at $425k from the previous month. Attached properties were hitting the median at $375k and detached at $471k .

Median Home Prices Denver County 2007-2018

This time last year, the median price range for detached and attached properties was $393k. That is a $32k increase from last year, a 8.1% appreciation rate. This is proof that Denver homes are continually increasing in value at an above normal appreciation rate.

Median Home Prices Denver Metro Counties March 2018

Widespread Violations Discovered in Denver Affordable Homes Program

Widespread Violations Discovered in Denver Affordable Homes Program

Source: Jon Murray and Aldo Svaldi of the Denver Post

Widespread Violations Discovered in Denver Affordable Homes Program

When Denver launched it’s affordable housing program in the early 2000’s, the city took on the responsibility of keeping up with everything involved in the transaction and making sure program rules were being implemented. In other words, Denver officials took on a big role that required a team to manage. But the Great Recession happened and between 2009-2012, budget cuts resulted in over 30 Denver officials being let go. This left the affordable housing program with one staff member. With inadequate staffing to run Denver’s affordable housing initiatives, there has been a lack of oversight from the city. The result? Some homeowners of affordable housing may be forced to sell.

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Is Denver's Housing Market Failing?

Is Denver’s Housing Market Failing? New Report Says It’s Very Close.

Source: Aldo Svaldi of The Denver Post

Is Denver's Housing Market Failing?

$80,000. That’s the estimated amount that potential buyers need to make if they want to buy the median priced home in Denver. And that price in Denver is now at $425k ($395K for attached homes and $455K for detached), which corresponds to a 20% down payment of $79-91K. For now, Denver’s median family income is right above $80k. Can incomes keep pace with soaring real estate prices?

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