March 21, 2017
By Jason Shepherd
In response to a recent article titled “Denver housing market ‘worrisome’ to real estate economists, who advocate renting here,” we respectfully disagree based on our years of experience being Colorado’s largest buyer of single family homes for rent.
It is very hard to apply a blanket statement that suggests that “it’s better to rent than buy” to a complex real estate market like Denver.
The article doesn’t explain critical assumptions the study employed (or didn’t) to reach that conclusion. In the words of my high school math teacher, “show your work.”
- Assumption for down payment – was it 20% or 5%?
- Did the study factor in HOA or tax assumptions, both of which can significantly effect ROI?
- Were the tax assumptions based on real Colorado tax statistics or were they a broad national average? Colorado has very low property taxes when compared to the rest of the United States, so this is hugely important.
- If, as a home owner, you must move every year, you will incur frictional costs. We agree. But you don’t have to sell your home; instead, you can rent it out and continue to build equity.
In the Denver area, we’re not seeing that “it’s better to rent than buy” in practice. It’s still cheaper to own than rent, especially in suburbs around Denver. In the city, particularly in or near downtown, it could be a different story depending on the type of property. Overall though, it’s still cheaper to own than rent.
We’d also like to contest the that statement, “the last time we saw scores of this magnitude, the housing market crash soon followed…” We don’t believe a housing crash is coming to Denver any time soon because of simple supply and demand. Some of the factors supporting a strong real estate market in Denver include positive net migration right now and more demand than we have supply. It’s pretty darn hard to envision a crash in a scenario like this.
If this situation changes dramatically and people stop moving here or leave because it gets too expensive, thereby reducing demand, while meanwhile we continue developing at a rapid pace, then there could absolutely be a crash. But we see no signs of this yet.
In closing, Denver is a strong and exciting real estate market and we see no signs of it abating.