Denver Market Starting to Plateau?

Question

http://www.denverpost.com/2017/01/18/metro-denver-...

Rents dropped and vacancy increased in the second quarter - most likely due to the huge number of units coming online every month.

Thoughts? Concerns? Strategy for the market going forward?

Bill S. · Answer

@Jason V. check out this post where it was discussed a bit the other day.

Tyler Stephens · Answer

I attended a RE trends class put on in December. While rents do have to plateau at some point, I don't think the number of units has caught up with the influx of people. According to the State Demography Office, Metro Denver's population is expected to grow by 50k a year for the next 2 years, and slowly tapering off to 40k a year by 2030. Even though multi-family building is in a frenzy right now, I can't seem them keeping up with that kind of demand.  There are other factors in play that may be affecting rents, possibly including seasonality. I always take news from sources whose purpose is to get you reading and clicking (read: sensationalism) with a grain of salt.

The article says that in 2016, 9,962 new apartments came online, which is an insane amount. But it also acknowledges that the drop in prices could be caused by landlords trying to fill their units quickly to satisfy the higher expectations of investors and banks. It also says that banks are tightening their capital requirements and demanding larger down payments, which will have a negative impact on future apartment growth, driving prices back up. Those two factors point towards this downturn being temporary. But who knows. from what little I've learned it seems trying to predict the future is at best a risky strategy and at worst a terrible, terrible idea.

Jason V. · Answer

Well, I'm a day late and a dollar short, as usual. :-)

Thanks @Bill S.!