Is the Denver market in a Bubble.....?
Denver, CO · Member since 2016 · 11 posts · 2 votes
Is the Denver market in a Bubble.....?
Most Popular Reply
Realtor · Denver, CO · Member since 2013 · 2k+ posts · 1k+ votes
10ySevere bubble here. Not worth even trying to invest due to prices. People are leaving the city in droves.
PS - Our weather is terrible and our football team sucks. Keep driving to KC;)
47 Replies
- Denver, CO · Member since 2016 · 11 posts · 2 votes10y
Hahaha. Just pickin cause we took a greedy Osweiler, but I agree....Broncos are still a solid contender.... at least for a playoff spot.
- 10yMindy JensenPro MemberBiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
@Michael DeFrancesco, I'm sorry, you cannot be a Texan fan and live in Denver. Brock desserted us because we chose Peyton Manning over him.
- Commercial Real Estate Appraiser · Houston, TX · Member since 2015 · 23 posts · 6 votes10y
@Matt M. I'm looking forward to watching the Broncos this year. They did get the QB who did the greatest play of all time in the offseason so I'm excited for some laughs:
https://www.youtube.com/watch?v=82RIfy-gRa4
- Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes10y
Originally posted by @Jacob Pereira:
I don't know the Denver market, but I do know the Austin market, and I see a lot of similarities. Both were sleepy mid-sized cities a few years ago and have seen explosive economic and population growth in the last 10 years and are now considered major destination cities. There's a lot of talk in both places by investors about housing and tech bubbles and lack of affordability. So with that caveat, I'll give you my opinion:
What I can tell you is that house pricing doesn't drive population and job growth in a city; rather the opposite is true. The fact that people are moving in, and there are jobs that can sustain the market is the reason prices are so much higher than they used to be (still much lower than such major metropolitan areas such as New York, DC, or pretty much the entire West Coast). Once the new jobs and population growth slow down, you'll see prices flatten; what you won't see is that people suddenly decide it's too expensive and that prices fall through the floor.
It reminds me of the oft quoted line from Warren Buffet, "Be Fearful When Others Are Greedy and Greedy When Others Are Fearful." I simply am still seeing too much fear and not enough confidence to believe that people are taking the kinds of extreme risks they were in 2007-2008 to cause a major crash. I can't tell you for sure that the boom won't end soon, but what I can tell you with relative confidence is that there are still plenty of good deals to be had.
Jacob, your 2nd paragraph sounds like rosy and wishful thinking.. There was a market correction every 7-10 years, for the last 200 hundred years. This had to do more with human psychology, and less so with the laws of supply and demand. There are VERY few markets that only flatlined while everyone else experienced a decrease in property values. While is it nice that you wish think would happen in Colorado, this doesn't support evidence from the last 200 years of human evolution.
- Real Estate Agent · Austin, TX · Member since 2014 · 636 posts · 486 votes10y
Hi Andrey, How do you do that thing where you get my whole post into your post?
To address your comment, I agree that I can be overly optimistic in life and real estate, but I believe that in this case you are combining two pieces of research that are not related. The first, that stock markets have crashed every 7-10 years ever since the great depression is true and well-documented (so if you believe in timing the markets, it's about time to get out of stocks). The second is a theory by an economist named Homer Hoyt that says that real estate busts have formed every 18 years for the last 200 years. Another BPer did an excellent post on this about a year ago Here.
By the way, I don't fully subscribe to Hoyt's theory, at least in the sense that we can expect the next bust sometime around 2024, but I guess we'll have to wait to find out. Shall we bet a beer on it? I've heard Honolulu is nice and I could use a vacation.
- Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes10y
Originally posted by @Jacob Pereira:
Hi Andrey, How do you do that thing where you get my whole post into your post?
To address your comment, I agree that I can be overly optimistic in life and real estate, but I believe that in this case you are combining two pieces of research that are not related. The first, that stock markets have crashed every 7-10 years ever since the great depression is true and well-documented (so if you believe in timing the markets, it's about time to get out of stocks). The second is a theory by an economist named Homer Hoyt that says that real estate busts have formed every 18 years for the last 200 years. Another BPer did an excellent post on this about a year ago Here.
By the way, I don't fully subscribe to Hoyt's theory, at least in the sense that we can expect the next bust sometime around 2024, but I guess we'll have to wait to find out. Shall we bet a beer on it? I've heard Honolulu is nice and I could use a vacation.
Interesting. The peaks and valleys I am seeing correspond to about 7-10 year timeframes, not 18. Just look at the last (latest) 3 peaks and valleys.
- Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes10y
@Jacob Pereira Yes, it is quite nice. Best balance and closest proximity of outdoors/beach and water activities/food/nightlife/weather I've seen. You can pretty much do what you want, when you want, and where you want, all year round. With the exception of skiing.
Places like SF and NYC definitely win when factoring in motivated/interesting people per capita though :P I tried really hard to not like it, but my 5 years here have been a blast, both personally and professionally.
- Real Estate Agent · Austin, TX · Member since 2014 · 636 posts · 486 votes10y
Originally posted by @Andrey Y.:
Originally posted by @Jacob Pereira:
Hi Andrey, How do you do that thing where you get my whole post into your post?
To address your comment, I agree that I can be overly optimistic in life and real estate, but I believe that in this case you are combining two pieces of research that are not related. The first, that stock markets have crashed every 7-10 years ever since the great depression is true and well-documented (so if you believe in timing the markets, it's about time to get out of stocks). The second is a theory by an economist named Homer Hoyt that says that real estate busts have formed every 18 years for the last 200 years. Another BPer did an excellent post on this about a year ago Here.
By the way, I don't fully subscribe to Hoyt's theory, at least in the sense that we can expect the next bust sometime around 2024, but I guess we'll have to wait to find out. Shall we bet a beer on it? I've heard Honolulu is nice and I could use a vacation.
Interesting. The peaks and valleys I am seeing correspond to about 7-10 year timeframes, not 18. Just look at the last (latest) 3 peaks and valleys.
It took me a while to find this this graph (I'm a data analyst in my day job, so I geek out on this stuff), but I eventually found it. It's an aggregate of housing data from 14 major economies, which, while interesting, I feel like is way too large a group to attribute to Dever's local market. A fascinating read for all you other BPers who like to spend their Saturday nights looking at real estate data. A better one to look at in my opinion, would be the US one, from page 19 in the study (although honestly really still too big to attribute to Denver, in my opinion).
Here you can much more clearly see the 18 year drops that Hoyt describes. Like I said before though, time will tell.
- Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes10y
Originally posted by @Jacob Pereira:
Originally posted by @Andrey Y.:
Originally posted by @Jacob Pereira:
Hi Andrey, How do you do that thing where you get my whole post into your post?
To address your comment, I agree that I can be overly optimistic in life and real estate, but I believe that in this case you are combining two pieces of research that are not related. The first, that stock markets have crashed every 7-10 years ever since the great depression is true and well-documented (so if you believe in timing the markets, it's about time to get out of stocks). The second is a theory by an economist named Homer Hoyt that says that real estate busts have formed every 18 years for the last 200 years. Another BPer did an excellent post on this about a year ago Here.
By the way, I don't fully subscribe to Hoyt's theory, at least in the sense that we can expect the next bust sometime around 2024, but I guess we'll have to wait to find out. Shall we bet a beer on it? I've heard Honolulu is nice and I could use a vacation.
Interesting. The peaks and valleys I am seeing correspond to about 7-10 year timeframes, not 18. Just look at the last (latest) 3 peaks and valleys.
It took me a while to find this this graph (I'm a data analyst in my day job, so I geek out on this stuff), but I eventually found it. It's an aggregate of housing data from 14 major economies, which, while interesting, I feel like is way too large a group to attribute to Dever's local market. A fascinating read for all you other BPers who like to spend their Saturday nights looking at real estate data. A better one to look at in my opinion, would be the US one, from page 19 in the study (although honestly really still too big to attribute to Denver, in my opinion).
Here you can much more clearly see the 18 year drops that Hoyt describes. Like I said before though, time will tell.
I never claimed that chart can be attributed to Denver's current market, only to human psychology and market trends over the last few centuries. Why is Denver immune to what every major city has displayed? I would love to hear your analysis. The way you talk, is the same way most investors talk 0-2 years away from a market bubble.
- Real Estate Agent · Austin, TX · Member since 2014 · 636 posts · 486 votes10y
Originally posted by @Andrey Y.:
Originally posted by @Jacob Pereira:
Originally posted by @Andrey Y.:
Originally posted by @Jacob Pereira:
Hi Andrey, How do you do that thing where you get my whole post into your post?
To address your comment, I agree that I can be overly optimistic in life and real estate, but I believe that in this case you are combining two pieces of research that are not related. The first, that stock markets have crashed every 7-10 years ever since the great depression is true and well-documented (so if you believe in timing the markets, it's about time to get out of stocks). The second is a theory by an economist named Homer Hoyt that says that real estate busts have formed every 18 years for the last 200 years. Another BPer did an excellent post on this about a year ago Here.
By the way, I don't fully subscribe to Hoyt's theory, at least in the sense that we can expect the next bust sometime around 2024, but I guess we'll have to wait to find out. Shall we bet a beer on it? I've heard Honolulu is nice and I could use a vacation.
Interesting. The peaks and valleys I am seeing correspond to about 7-10 year timeframes, not 18. Just look at the last (latest) 3 peaks and valleys.
It took me a while to find this this graph (I'm a data analyst in my day job, so I geek out on this stuff), but I eventually found it. It's an aggregate of housing data from 14 major economies, which, while interesting, I feel like is way too large a group to attribute to Dever's local market. A fascinating read for all you other BPers who like to spend their Saturday nights looking at real estate data. A better one to look at in my opinion, would be the US one, from page 19 in the study (although honestly really still too big to attribute to Denver, in my opinion).
Here you can much more clearly see the 18 year drops that Hoyt describes. Like I said before though, time will tell.
I never claimed that chart can be attributed to Denver's current market, only to human psychology and market trends over the last few centuries. Why is Denver immune to what every major city has displayed? I would love to hear your analysis. The way you talk, is the same way most investors talk 0-2 years away from a market bubble.
Sorry, I misunderstood the point you were trying to make. I don't think the data backs up your claim that every major city has 7-10 year cycles, though. The Case-Shiller index for Denver, for example, doesn't show the trend you're describing:
This chart shows a bit of flattening to the market (or a really small reduction, if you want to get technical about it) starting in about '82, and another one in '07. Like I mentioned earlier, I wouldn't be surprised in the least if the market flattens in the next few years, but I don't foresee a crash in the next few years. Either way, like I mentioned in the beginning, provided you structure your deals with a high enough margin, a crash should only lower your cashflow, not put you out of business.
- Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes10y
Originally posted by @Jacob Pereira:
Originally posted by @Andrey Y.:
Originally posted by @Jacob Pereira:
Originally posted by @Andrey Y.:
Originally posted by @Jacob Pereira:
Hi Andrey, How do you do that thing where you get my whole post into your post?
To address your comment, I agree that I can be overly optimistic in life and real estate, but I believe that in this case you are combining two pieces of research that are not related. The first, that stock markets have crashed every 7-10 years ever since the great depression is true and well-documented (so if you believe in timing the markets, it's about time to get out of stocks). The second is a theory by an economist named Homer Hoyt that says that real estate busts have formed every 18 years for the last 200 years. Another BPer did an excellent post on this about a year ago Here.
By the way, I don't fully subscribe to Hoyt's theory, at least in the sense that we can expect the next bust sometime around 2024, but I guess we'll have to wait to find out. Shall we bet a beer on it? I've heard Honolulu is nice and I could use a vacation.
Interesting. The peaks and valleys I am seeing correspond to about 7-10 year timeframes, not 18. Just look at the last (latest) 3 peaks and valleys.
It took me a while to find this this graph (I'm a data analyst in my day job, so I geek out on this stuff), but I eventually found it. It's an aggregate of housing data from 14 major economies, which, while interesting, I feel like is way too large a group to attribute to Dever's local market. A fascinating read for all you other BPers who like to spend their Saturday nights looking at real estate data. A better one to look at in my opinion, would be the US one, from page 19 in the study (although honestly really still too big to attribute to Denver, in my opinion).
Here you can much more clearly see the 18 year drops that Hoyt describes. Like I said before though, time will tell.
I never claimed that chart can be attributed to Denver's current market, only to human psychology and market trends over the last few centuries. Why is Denver immune to what every major city has displayed? I would love to hear your analysis. The way you talk, is the same way most investors talk 0-2 years away from a market bubble.
Sorry, I misunderstood the point you were trying to make. I don't think the data backs up your claim that every major city has 7-10 year cycles, though. The Case-Shiller index for Denver, for example, doesn't show the trend you're describing:
This chart shows a bit of flattening to the market (or a really small reduction, if you want to get technical about it) starting in about '82, and another one in '07. Like I mentioned earlier, I wouldn't be surprised in the least if the market flattens in the next few years, but I don't foresee a crash in the next few years. Either way, like I mentioned in the beginning, provided you structure your deals with a high enough margin, a crash should only lower your cashflow, not put you out of business.
Interesting. Thanks for your comment. Only a 5.3% annualized growth? I was expecting more out of Denver.
When I look at the chart.. these are the "peaks" I see: '85, '94, '01, '07, ('17)? See them? Look harder.. They are more subtle than the generalized macro US market chart I posted, where they are more like spikes.
- Real Estate Agent · Austin, TX · Member since 2014 · 636 posts · 486 votes10y
Keep in mind, that's 5.3% since '77. nationwide housing prices track pretty close to the inflation rate over the long term, which is more like 2% annualized. I see what you're referring to, but I certainly wouldn't consider them "bubbles". Being cautious is a good thing, but if @Michael DeFrancesco is walking away from good deals because he's worried about the possibility of a bubble, I think that's a mistake. Again, none of us know the future, but I'm looking forward to that beer in Hawaii in 2024.
- 9yKreighton ReedPro MemberSpecialist · Denver, CO · Member since 2016 · 45 posts · 59 votesI recently heard an analyst say this about the Denver housing market: it has 10% more growth before it will catch up with other city's in the US with the same demographics (population, # of sports teams, # of colleges etc.) Denver investors look at values in WY, UT, NM and think Denver is overpriced. If you are from a costal city in either California or the Northeast, Denver prices are very reasonable.
- Denver, CO · Member since 2016 · 21 posts · 9 votes9y
@Michael DeFrancesco I'm in the same boat as you my man. I'm currently analyzing two markets (via MLS): ATL and Denver. My wife and I are making some personal decisions about her job and I work from so there will ultimately be some personal points at play here.
But that being said I'm looking at the two cities in a very detailed way.
Atlanta represents macro economic growth. The job creation rate in the city here is 3.5% which is higher than the next closest city by a full 1%. It is also a destination for the majority of immigrants in America today which means rents will remain steady over time. There is low rental inventory and rent is artificially high because condos dominate the market (only20% can be rented in a condo building). Property values are low and the NOI is significant. However, congestion is high therefore most of the city is growing out rather than inside. I don't like that on a personal level and I don't like that as an investor owner occupier.
Denver on the other hand is growing differently. The economic growth appears to be following the C word (read: Cannabis) and while other economic factors lead me to believe the economy is diversifying the great influx of youth seem to be drawn to the lifestyle of the surrounding area. That being said I recently read an article about how permits for rental buildings are outpacing demand (as noted here). This concerns me. Why? Because rents will eventually lower. The appreciation of multi-family market values seems to be in a bubble. That means that the average duplex on MLS is over $400k. That creates low NOI if you are using the BRRR method. And if rents were ever to drop we would see cashflow in the negative. That being said...there aren't going to be rent decreases in Highland Town, Cherry, or Congress Park or in up and coming neighborhoods like Berkeley. And, Denver is a destination city. I just know that to minimize risk I'm going to have to force appreciation because in 2019 when those rentals are on the market I believe we are going to see the value drop on those multi-family holdings and even if I still have good NOI I don't want to see all my cash equity flushed away. I believe that is called hedging in the stock market :)
I welcome local dissenting opinions.
Also interested in hearing from others which parts of Denver are developing into neighborhoods. I love this aspect of REI and it is the number one thing that makes me passionate about it. My observation/learning period of real estate occurred in some very specific neighborhoods of Baltimore. It showed me how local community and specifically local business owners create such an important chemistry that greatly effects property values and marketing of a particular neighborhood.
- Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes9y
just a little point about Atlanta - that 'growing outward' trend is a good reason to invest intown, instead of the suburbs. People are sick of the traffic and will live closer to where they work and intown neighborhoods are more in the direction of revitalization , than the other direction.
And when you add the potential of the Beltline to that, I would say that the intown market is where it's at. And, yes, I put my money where my mouth is: All my investments are intown.
When you invest in the suburbs, there will always be new houses that are just a little newer than the ones existing, maybe at the same price. It's very cookie-cutter. Ok for families with kids, but younger people typically don't want to be OTP (outside the perimeter). It's just not considered 'cool'.
- Denver, CO · Member since 2016 · 21 posts · 9 votes9y
@Michaela G. that does make sense. I also know some people who have done well for themselves Braselton as the city grows northeast.
I am also exclusively looking around the beltline. I was in a SmartCity's conference the other day (courtesy of my day job) and Atlanta city planners have begun centering all investment infrastructure around North Ave. FWIW I see that area as becoming gentrified on both sides through to Howell and Bankhead.
- Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes9y
@Kevin O'Brien so Denver has lower rates of return because people are willing to sacrifice returns for the lifestyle. I think Denver's infrastructure has positioned it to be a player for years to come. For me, living here wins hands down over the heat and humidity of Atlanta. I know the heat and humidity doesn't bother some people though. That's why both areas are growing.
- Aurora, CO · Member since 2016 · 158 posts · 118 votes9yIMO, SFR are inflated, not in a bubble...yet. Average home price vs average family income pushes very close to the DTI max. Multi family are in a bubble I feel. The price per sqf is almost double SFR. I think when more states begin to allow rec Weed the less influx we will have. People will have more choices where to go enjoy their habit and might opt for warmer climates, ex NV and AZ this election cycle. Also with housing and rent how it is if those ultra low rent and property states (compared to CO) pass the laws some people might migrate out of necessity due to the high prices locally. I realize that my assumption is based on Weed, but that is our Prohibition and if history teaches us anything it is that where it is available people will flock too it. Just my two cents.
- Denver, CO · Member since 2016 · 21 posts · 9 votes9y
@Bill S. could you give some examples of that infrastructure positioning you mention?
- Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes9y
@Kevin O'Brien yes light rail (FasTracks-Union Station), DIA (it's one of the newest major airports in the country). All that construction is going to be wrapping up in the next couple of years. None of the other top performing markets (based on appreciation) have similar infrastructure in place or coming on line. All that's in the future for them is more congestion and sprawl. In Denver, those that are priced out of the urban core can still live the urban lifestyle (no car and walk or ride public transport) but live where rents and homes are cheaper. The next five years here when everything opens up is going to be amazing.
- Investor · Denver, CO · Member since 2014 · 26 posts · 6 votes9y
Been a residential RE investor in the Cap Hill / Cheesman Park area since 2010. Units that used to take one day to rent out now take 2-4 weeks to rent.
- Realtor · Denver, CO · Member since 2013 · 2k+ posts · 1k+ votes9y
Originally posted by @Benjamin L.:
Been a residential RE investor in the Cap Hill / Cheesman Park area since 2010. Units that used to take one day to rent out now take 2-4 weeks to rent.
Good to know. I've been noticing vacancy signs up more and more. What are you seeing for 1 bd and 2 bd as far as rates go?
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