There is no surprise that population growth has a direct impact on a real estate market. An example of this is metro Denver, which is among the fastest growing in the nation — growing 2.1 percent, well above the national average of 0.8 percent growth, according to a recent analysis of U.S. Census Bureau data.
Millennials, entrepreneurs and a talented workforce are moving to the metro area to call it home.
Trends that metro Denver experienced last year due to housing demand are opportunities that real estate agents can leverage in growing cities such as Charleston, Houston, Raleigh, Fort Myers and Austin.
So, what can other markets projected to have skyrocketing populations in 2017 glean from Denver?
First, for perspective, our January 2016 market trends report stated: “Looking forward into 2016, the top concerns are tight inventory, home affordability, appraisal issues, tight credit and TRID.” These issues all rose to the surface, and are the same issues facing many up-and-coming hot cities throughout the United States today.
So what were some direct impacts to the housing market as a result of population growth? Well, for starters, Denver area homebuyers learned how to be very savvy:
Nontraditional loans
Brigette Modglin, broker associate with Kentwood City Properties, said that homebuyers increasingly took a more unconventional route to purchase their homes — from cash buyers, VA Loan for multifamily properties and HELOC on second homes to be able to buy without a contingency.
In fact, Modglin shared that she recently had a buyer pull out a home equity line of credit (HELOC) on their vacation home so they would not have to have a contingency to sell their current home, allowing the buyers to negotiate and get the house they wanted.
Nontraditional housing
Homebuyers are finding ways to make it work in a market where the average home price was $363,143 in January.
Container homes and prefab homes are becoming popular. Modglin said, “You can buy a shipping container from $1,500 up to $3,000, which is cheap real estate when you think about it — and it’s a full structure that just needs to be fabricated into what you want it to be.”
Another unconventional story Modglin shared shed light on a nontraditional housing approach.
She said, “I had homebuyers relocate from Kansas with their company and, instead of using their relocation package for temporary housing, they rented an RV pad and stayed in it until their new home in Colorado was built.
“They used the money saved from not renting in corporate housing, for upgrades in their new home and two new jet skis as a reward for camping out for 60 days.”
New investment potential
Modglin said that she has also seen several RV’s listed on Airbnb as home exchanges, a trend on the rise. Homebuyers are specifically looking to buy properties that will allow Airbnb/VRBO opportunities to benefit from this rental income.
Furthermore, homeowners are increasingly renting out their homes long term in order to travel or relocate.
Regarding investors, notably, Modglin said, “Investors came to buy investment properties, but quickly realized that their returns were too low in the Denver market and are looking in other markets.”
Looking ahead into 2017, Steve Danyliw, chair of the DMAR Market Trends Committee and real estate agent with Danyliw & Associates, states, “The Trump administration will impact the housing market. Housing interest rates have already seen a slight increase since the general election, and these interest rate increases in metro Denver could price out first-time homebuyers.
“Additionally, Fannie Mae and Freddie Mac may transition from a government-sponsored enterprise to a completely privatized organization.”
These issues and trends are not isolated to Denver. Real estate agents in other major markets can take cues from our experience to proactively address them head on.
In other words, leverage Denver as a crystal ball of sorts to find opportunities when inventory is tight and home prices are on the rise.
Have you noticed an impact on the housing market due to population growth? Comment below and share your perspective!
Ann Turner is the chief executive officer at the Denver Metro Association of Realtors (DMAR). You can follow DMAR on Twitter at @DMARealtors.