CREJ - Multifamily Properties Quarterly - November 2016
“Anyone who can’t get millennials into your community is in big trouble,” Tom Clark with Metro Denver EDC told the audience at the CREJ multifamily conference in October. Millennials make up 24 percent of metro Denver’s population, 32.5 percent of the 2 million jobs in the city, and represented nearly 52 percent of the in-migration to the metro area in 2014, according to a report from Metro Denver EDC. With this influx of skilled workers, you’d imagine the job market is thriving. However, Clark shared one concerning statistic from the past year. In 2015, Colorado was the fifth fastest-growing state for nonfarm job growth. We’ve fallen to No. 11 through the first half of 2016. Clark took time during his keynote presentation to link job growth to affordable and attainable housing. He told the audience that opportunities for business recruitment will struggle until we get a handle on home prices, and used Boulder as an example, which saw its median home prices exceed $500,000. When compared with our competitors, Denver has the highest median home price and has seen the fastest price increases, followed by Portland, Oregon, Austin, Texas, and Salt Lake City. Phoenix, Dallas and Atlanta – other competitive cities to Denver – all fall below the U.S. median home price. Escalating costs make is challenging for first-time homebuyers to enter the market. I believe it is a common misconception that, as a whole, the millennial population is uninterested in buying homes. Far more would, could they afford it. However, it also is true that this generation is doing things later in life – getting married, buying a home, starting a family – which is good news for the rental market. And with birth years ranging from 1981 to 1997, there’s a whole wave of this generation just entering early adulthood and the rental market, promising a relatively long run of demand. For all these reason, the multifamily business is booming. In 2016, multifamily projects represents 54 percent of new construction. The 30-year average for multifamily construction is 28 percent, according to Clark. Inside this issue, experts dive further into the debate surrounding the multifamily construction pipeline in the face of all these changing demographics. Many in the industry already know these generalizations and know that the lack of condominium development is only exacerbating the issue. In a healthy market, 22 percent of the market should be for-sale condos. In 2015, 187 condos were built. Not only is this number extremely low, but also all of these new condos were over $400,000. In a healthy market, condo development can be used as a stepping stone to homeownership. At this price point, it’s out of many people’s reach.