A Brief Overview

Metro Denver looks like the center of the universe for apartments. The cities which used to lead in new apartment construction were Houston and Seattle but they now seem to reflect the national picture where new apartment supply is expected to drop by 11% compared to last year. Denver, however, has a very different story to tell. Apartment construction is increasing compared to last year. Between January and June of this year, more than 7,600 new apartments came on the market, and almost another 14,000 are planned for the second half of the year. Even if they are not all built, 2018 will see a lot of apartments available. Even if developers only build as many units in the second half of the year as they did in the first half, Denver will rank third in the nation behind New York City and Dallas, and they have much larger populations than we do.

What May Be Driving This Good News Story?

There are a few reasons. One is that Colorado's tech industries and other employers are doing well. Denver ranks #1 for job growth among small and medium-sized businesses, and we rank #3 in terms of wage growth.

The number of Millennials living here is also high. Colorado ranks #3 in the country, behind Washington and Texas. Rumor has it that Millennials are busy people. They would prefer to pay a  homeowners' association than to spend their free time on outside maintenance and doing yard work.

Another reason is that interest rates are still very low. Yes, the average mortgage rate has increased between O.5% and 0.75% compared to last year, but a 30 year fixed loan is still about half of what it used to be some years ago. Millennials' parents will even remember mortgage rates well above 10%.

Ways to Capitalize on the Apartment Market

There are several ways to make the most of this year's new construction, depending on your goals. Let us check off a few options:

1. If you live and work in Metro Denver, buy a new apartment for yourself or for you to live in and sublet. This gives you a place to live, a place to share, someone to help with the living expenses, and the strong likelihood that the 10% growth in value each year should help you grow your equity.
2. Buy an investment property. Choose your area, buy your apartment, then have a successful property management company find you reliable tenants, and manage everything for you. The rent they pay will contribute towards your mortgage payments and overheads, while you watch your investment increase in value.
3. Rent a new apartment for yourself and your family, enjoy the Denver lifestyle, and plan ahead for whatever you want your future to hold.

Final Comment

With a steady real estate growth rate of about 10%, high employment and what looks like a strong future for our area things look good long term. Could there be a "real estate bubble" that will burst? Well, no one has a crystal ball, but previous bubbles burst when property values appreciated at about 30% a year, and new builds far outstripped demand. Those factors are not at play here and now. so, if you would like to discuss opportunities, whether you are considering buying or renting, please feel free to contact us by clicking the link.

(Sources: Denver Post Business Section July 28, 2018 and Denver Post Article by LIV Sotheby's International Realty July 29, 2018)