Tag Archive: Mike Rinner

  1. Here Are The Hottest Markets In The Country

    The buyer urgency created by constant housing news coverage and ever-changing housing payments from rising rates is unmistakable. Last week, the Federal Reserve raised short-term rates for the second time in 2018. And, while we’ve mentioned time and time again that it is important to pay attention to Fed policy, it is also critical to remember the relationship between mortgage rates and 10-year Treasury yields. Luckily, after crossing the feared 3% threshold at the end of April, yields continue to be range-bound between 2.8% and 3.0%. This has helped stabilize mortgage rates, which currently sit around 4.6%. Our Director of Economic Research, Ali Wolf, wanted to understand how sales activity across the country has responded to higher rates and dug into Zonda to find the answer.

    We pulled contract sales data to see the biggest year-to-date winners of 2018, which include Denver, San Diego, and Phoenix.


    Coming in at number one for the greatest growth in sales is Denver. This market has dominated news cycles for its rapidly changing fundamentals. When looking at affordability, we like to break markets into different categories. In 2010, Denver was bucketed with the moderately affordable markets like Raleigh and Atlanta. Today, the metro now falls under the least affordable category, playing in the same league as Seattle, Miami, and Los Angeles. Denver new home closing prices grew 42% from 2012 to 2017, reaching just under $500,000. This is all while the median household income is just over $75,000 and the current unemployment rate is 2.8%.

    “In metro Denver/Boulder, April year-to-date sales over $400K were up 13%, while contracts for homes priced under $400K grew 41%. We will watch to see if rising rates shift demand more towards lower priced homes,” explains our Senior Vice President of Advisory and Denver expert, Mike Rinner.

    Jeff Whiton, the CEO of the Home Builders Association of Metro Denver, notes that builders are scrambling for higher density product. He explains, “Single-family attached starts are up 35% in the first third of the year, and I expect that trend to continue.”

    Even as fundamentals change, sales in Denver are strong. Like most markets, sales historically pick up during the spring selling season, but in Denver, the spike was nearly 30% this year. The top builders in Denver are currently Richmond American Homes, Lennar, and Clayton Properties Group, who collectively make up roughly 35% of the market. Don’t be surprised to see the seasonal slowdown in the May and June data. In 2016, the average sales pace slipped 13% from April to June and dropped 27% during the same months in 2017.

    Our latest feature in Zonda lets you instantly visualize a heat map of the average new home sales rate by market. We pulled Denver to understand submarket strength, and found that Adams County has the best sales rate in the metro area. The aforementioned top builders for the metro are also quite active in Adams County. The best-selling project is Carriage House at Riverdale by Oakwood Homes, where clustered single-family detached homes start at $340,000.


    The Coloradan condominium development is the best-selling active new home project in the Denver CBSA. Standing at 19 stories tall, the building includes ground-floor retail, 294 market rate homes, 33 affordable homes, and seven penthouses. Opened less than a year ago, the community is over 80% sold out. Furthermore, their best-selling residence type is the studio unit. The 49 studios are now sold out, but ranged from 485-534 square feet and sold primarily to Millennials (mostly mid- to late-20s) for under $300,000 (some units went for more). Just two of the 113 one-bedrooms remain unsold.

    • Best location in town. The Coloradan benefits from its location in downtown Denver practically adjacent to Union Station. The area is walkable to main employment hubs, and once development is complete, ground-floor retail will include a boutique fitness center, a coffee shop, bar, restaurant, dry bar, and more. There’s already a Whole Foods across the street. The Whole Foods was added because of the scale created by the abundance of for-rent communities in the area.
    • Limited competition. Condo development has been nearly non-existent for the past 10 years in Colorado. The Coloradan stands as just one of four actively selling communities in the Downtown Denver submarket. Roughly 95% of their traffic comes from online appointments.
    • All-encompassing. The Coloradan attracts a broad range of buyers with the exception of most families. Given the price point, location, and lifestyle, the luxury high-rise product appeals to empty nesters, singles, dual income no kids, existing condo owners, transplants, and investors.

    Fun facts about The Coloradan:
    1. Besides studios, the penthouses are the only other residence type to sell out
    2. The sales center is located in a WeWork space to create a more experience-driven relationship with the buyers
    3. There’s a fifth-floor community garden. The community will offer free classes to advise residents on the best plants and garden tactics give the cardinal direction of their respective units (HOA approved, of course)
    4. The mezzanine floor will include an “owners’ library” that will host 1-2 favorite books from each household, funded by the owner

    Rendering of the studio floorplan. Source: thecoloradan.com

    We analyzed contract sales by market in absolute terms and found that Dallas leads the nation with the most year-to-date contracts, followed by Houston and Phoenix. Please let us know if you’d like to see the full list.
    Contact us to discuss how we can help you stay competitive in today’s evolving housing market.
  2. The Colorado Condo Comeback

    Colorado condo development is rapidly ramping up and has re-emerged with an explosion of new and varied architectural designs, construction techniques, features, and amenities. Our Senior Vice President of Advisory, Mike Rinner, reveals the latest condo trends such as leased parking, elevator accessible condos in the suburbs, and new buildout of failed projects.

    This is a dramatic change compared to the past decade when Colorado condos had practically disappeared due to a series of controversial and expensive court awards and settlements (see graph from Zonda iPad app below). Meanwhile, Denver’s home prices skyrocketed and are now at 41% above pre-recession peak prices, which is the highest increase of all metro areas surveyed by the Case-Shiller Home Price Index. The reason Colorado condo development is ramping up is because of two boosts this year in May/June 2017: The Colorado legislature passed House Bill 1279 and The Colorado Supreme Court ruled in favor of the builder in the Vallagio condominium lawsuit. Courts must now recognize a provision in a project’s condo declarations requiring arbitration to resolve disputes, and a majority of homeowners now must approve a construction defects lawsuit by their HOA.


    Exciting opportunity and growth has set the stage for developers to be more innovative and futuristic with new projects in Colorado. Below are 5 of the biggest trends we’ve seen so far:



    Some of these projects were distressed property acquisitions by long-term investors who have held them for years, while others are recent land sales by lenders who have been unable to find buyers until now. The builder of Prairie Walk Condos has been challenged to keep up with strong demand, which provides only open surface parking for residents at the price range shown.

    Prairie Walk Condos, Parker (Base Price Range: $202-$284/SF)



    Developer East West Partners is planning for the day when owners no longer need a car. The Coloradan is Denver’s largest condo development under construction with 334 units, and it includes the right to lease a place to park in the price of a condo rather than including a dedicated parking stall. Downtown Denver condo garages typically only have 60% occupancy, so shared parking will provide more space for retail customers, and residents can use extra stalls for family and guests. After The Coloradan’s first six weeks of being open for sale, 183 of the 301 market-rate units sold.


    The Coloradan at Union Station, Denver (Price Range: $610-$1,025/SF)



    Now under construction, Lakehouse on 17th has a total of 196 flats and townhome styled units in a building with striking architectural design. The project is large enough to justify its extensive amenities including fitness, sauna, community kitchen and dining room, lounge, and media den as well as its open-sky pool, hot tub, and landscaped sundeck with indoor/outdoor fireplace and organic farm. Lakehouse is Colorado’s first project to pursue WELL Building Standard Certification, with building attributes that consider air, water, nourishment, light, fitness, comfort and mind through the use of design and construction techniques to create an environment to support human health and well-being.

    Lakehouse on 17th, Denver (Price Range: $664-$900/SF)



    Laurel has shown incredibly high demand with 13 of 71 units placed under contract in the first two months after opening, and completion still 18 months away. This demand demonstrates the continued strength of the high-end market first addressed by the success of 250 Columbine in Denver’s Cherry Creek neighborhood in 2014-2015. Laurel will include an attended lobby/reception area and a well-designed rooftop entertainment deck with saltwater pool. Residences will feature very high-end finishes and designer kitchens.

    Laurel, Cherry Creek, Denver (Price Range: $740-$1,418/SF)



    In the past, nearly all suburban condos had walk-up access to upper levels – elevator buildings could only be found in dense urban environments with structured parking. These production homebuilders have now introduced two and three-story condo projects with elevator access in suburban locations, like the Westown Urban Flats by Century Communities. Note that some residents will have attached garages in both projects, but others can purchase an optional detached garage in lieu of open surface parking.

    Westown Urban Flats, Arvada (Closing Prices: $241-$290/SF)

    We always keep up to date and track the progress of successful condo projects like these. Contact us to learn what unique building and unit designs, features, and amenities you should be considering for your upcoming projects.


    Mike Rinner, Senior Vice President, Advisory


  3. The Amazon Effect & Your Secret Housing Niche


    Amazon is modifying the way we live our lives, from changing the landscape of retail, to introducing grocery stores without checkout lines and altering our perception of a smart home. They’ve even toyed with entering the real estate market. Beyond the consumer experience though, Amazon is a major employer. On August 2nd, they held a career fair looking to hire an additional 50,000 workers. This is after two other announcements earlier this year highlighting tens of thousands of open positions. Amazon employs the whole gamut of income levels, from warehouse workers to software developers and engineers. Amazon’s expansion plans not only will create new employment opportunities, but also impact local housing markets. Our Manager of Housing Economics, Ali Wolf, explores the less obvious way that Amazon contributes to housing growth.

    Job Openings By County For Amazon* 

    Source: LinkUp; Meyers Research
    *The percent change is based on January 2015-June 2016 compared to January 2016-June 2017


    Many of Amazon’s white collar employment opportunities are concentrated in markets like San Jose, San Francisco, and Seattle. Fulfillment center jobs are on the other end of the income spectrum. These jobs seem almost ubiquitous as Amazon builds and expands across the country. In Colorado, Amazon is hiring 1,000 employees for their Aurora fulfillment center, and another 1,500 for a ‘robotics facility’ in Thorton.

    While many are quick to brush off these workers as non-qualified buyers, we like to look at them a different way.

    • In Denver, a warehouse worker makes $12.50 an hour, which is equal to $26,000 a year. In a dual income household, that could easily translate into a combined $52,000 a year.
    • With a few assumptions about down payment and household debt, we calculate that this family can afford a $260,000 house at a 36% debt-to-income ratio.
    • As seen below, however, only 4% of Denver’s active projects fall within that price bucket. Expanding the debt-to-income ratio to 44% allows the same family to afford a $300,000 home in Denver.

    Mike Rinner, an industry veteran and our Advisory expert in Colorado, explained, “Townhomes priced in the $200Ks are selling extremely well, but like in other parts of the country, the labor shortages are delaying build times.” He continued, “While we can’t directly attribute the success in attached new homes to Amazon, communities like Cornerstone Townhomes and Riverdale Park in Thorton are attracting buyers in the $250K-$300K price range.”

    Denver Active Projects by Price Range
    Source: Zonda by Meyers Research. Based on 380 total projects.


    Amazon is creating a new warehouse in Troutdale (indicated by the green pin on the map below), the first of its kind in Oregon. The facility will hire 1,500 new workers upon completion in June 2018. These employees will be paid an average of $15.00 per hour, or $30,000 annually. Going through the same exercise as the Denver market above, a dual-income household in Portland at $60,000 a year can afford $340,000 at a 44% debt-to-income ratio. Unlike Denver, however, even in the far-out commuter market, there are no active projects under $350K.

    “Like in many metros, the existing home market is the feeder for entry-level homes. Single-family detached existing homes in Troutdale are now 14% higher than the previous peak, supplying many current homeowners with equity. We anticipate that as the submarket’s economy expands, there’s going to be opportunity for move-up homes, especially when looking at the map below,” explained Deanna Sihon, our Advisory specialist in the Pacific Northwest. She continued, “We recommend keeping the new facility on your radar. Amazon is planting more seeds in the Northwest that are likely to grow.”

    The anticipated facility will provide an economic boost to one of the last stops within the eastern part of the urban growth boundary, and add to an overall MSA that has already been garnering attention. As market dynamics change and affordability worsens in places like Seattle, the Bay Area, and Los Angeles, more individuals are looking at Portland as an alternative.

    Map of Active and Upcoming Projects Under $450K in Portland 

    Source: Zonda by Meyers Research 
    *A blue icon indicates an active project, while a gray one shows upcoming

    Contact us to discuss how we can help you position around Amazon’s expansion plans.

    Ali Wolf, Manager of Housing Economics


  4. Meyers Research Raises $500K For HomeAid To Combat Homelessness

    Meyers Research has partnered with HomeAid America to shine light upon and rally more support for building shelters in communities around the country. Last week’s Housing Market Outlook event hosted by Meyers Research raised $30,000 with combined ticket sales and sponsorships for HomeAid America, a leading national non-profit provider of housing for today’s transitionally homeless. To date, we’ve raised $500,000 in proceeds for HomeAid America. The organization builds and renovates multi-unit shelters for America’s homeless families and individuals (more than one million of whom are children) while the residents rebuild their lives. Help us spread the word and invite your colleagues to join as well in change making.


    Economic Session
    Presented by Ali Wolf, Manager of Housing Economics at Meyers Research

    Ali kicked off the event by covering the elephant in the room – the length of our current economic expansion and how long the strength will last. Luckily, baring some unexpected economic or geopolitical shock, the overall fundamentals support continued growth. For example, we’ve never had both the unemployment rate and mortgage rates be this low simultaneously. This combination helps explain the 9% YOY increase in national new home sales. The strong annual clip in sales is great for the overall economy since the housing industry’s multiplier effect creates additional spending once the consumer purchases the property. Recent homebuyers spend more money at places like Home Depot, Target, Amazon, and Wayfair than those that don’t move.

    Capital Session
    Moderated by Jeff Meyers, President at Meyers Research

    Joel Kaul, Regional President at Mountain Real Estate
    Rodney Montag, CEO and Managing Principal at RAM Real Estate Capital
    Robert Springer, Senior Vice President at Bank of America

    The length of the cycle discussion resonated with the capital partners, who are acting more “cycle aware.” With that mindset in mind, members on our panel said they are carrying on business as usual. The panelists believe consumer fundamentals are solid across most markets in the country, but, supply is still a top concern. For example, in Denver, the months of resale supply is below 2.0, far from the 6.0 equilibrium level. The panelists explained that some master plans are accelerating their phasing to help bring more supply to the market now. They’ve seen increased appetite of more segmentation within communities, including villas, townhomes, and single-family detached.

    It’s hard to be in Denver without a discussion of condo development. There’s a huge opportunity in the condo business for Denver because of the price point, but there’s also many headwinds. Condo deals in Denver appear too risky for some investors as the risk of litigation persists. Our panelists also believe that rising costs, in some cases, make providing this product at an attainable price unrealistic. For the experts to seriously consider condo development, they’d want to work with partners that specialize in the space. If they don’t feel the expertise is there, they’d rather work on higher priced single-family detached projects.

    Homebuilding Session
    Moderated by Mike Rinner, Senior Vice President at Meyers Research

    Liesel Cooper, EVP and Western Regional President at Century Communities
    Chetter Latcham, President at Shea Homes Colorado
    Jeff Willis, Principal at Berkeley Homes

    The builder panel inadvertently highlighted the need for consumer research on a local level by going back and forth on providing amenities within new home communities.

    The pro-amenity argument: sense of community

    • Some buyers purchase a home based on their desired lifestyle. These buyers idealize bringing their kids to the pool and participating in community barbecues. In these cases, the house is just a side item compared to the accompanying lifestyle and sense of community.
    • Once the owner is ready to move, their resale value will be higher.

    The anti-amenity argument: costs

    • Affordability is a big issue in Denver. Adding amenities increases the monthly payment for buyers, making it harder for entry-level individuals to enter the market. For some communities, the location is the amenity.
    • People only really use the pools for a few months in Denver due to the climate. Is the cost justified?


  5. Denver’s Pending Condo Boom

    Denver’s housing market fundamentals cry out for new condo development, yet the industry remains in the doldrums. A ray of hope is on the horizon, however, that may soon open the floodgates. In many ways, Denver is enjoying some of the best economic conditions in the country, with strong job growth and in-migration, low unemployment, and rising home prices (see Mile High Rebound by our Chief Economist, Kevin Gillen). Yet the housing industry continues to under-supply market demand.  Consider the following:

    Ramifications of Excess Demand: Our analysis of Denver’s population growth and building permits reveals that the new housing industry under-supplied demand by an average of 8,000 homes and apartments per year from 2013 through 2015. As a direct result of this imbalance, annual home price appreciation and apartment rent increases both averaged nearly 10% for the past two years. With similar population increases forecast, there is clearly a golden opportunity for strong growth of the new housing industry in Denver, especially at more affordable price points that could be met by condo builders. Yet condo construction remains in the doldrums, particularly at price points with the greatest demand.

    Attached Housing Fails to Fill the Supply Gap: In the past, Denver’s new condo market played an integral role by helping the housing industry supply entry level buyers with homes they could afford during times of rapidly escalating home prices. The last prior such era was from 1998 through 2000, and attached housing comprised 30% of the new for-sale housing market. Over the past three years of high price appreciation, however, attached housing failed to pick up this excess demand. In fact, the share of attached housing actually declined, amounting to just 13% of new home closings in 2015. Furthermore, the attached housing now being created can no longer be characterized as affordable. Denver’s home prices rose by 21% over the past two years, leading all of the 20 top MSA’s analyzed by Case Shiller. Over these two years, the average new attached home closing price increased by a whopping 33% to an average of $466,276 – just 5% less than the average for new detached homes.

    So Why Not Build Condos? Denver’s construction industry has the proven ability to produce a large volume of good quality attached housing; nearly 21,000 new units were added to the metro Denver area supply of apartments over the past three years, including suburban two- and three-story walk up buildings as well as urban towers with 10 to 20+ stories. Most of these units are considered Class A properties with high finish quality and extensive amenities that would be very suitable as for-sale condos. With capital providers now beginning to worry that Denver’s apartment demand may have peaked, the stage would seem to be set for a re-emergence of the condo market. The problem with this scenario, however, is Colorado’s construction defects litigation environment. Since 2007, directors of a Colorado condominium HOA have been able to initiate a construction defects lawsuit on behalf of the entire project without asking for approval by the other owners, thus making it much easier for plaintiff attorneys to form class action lawsuits. Mindful of the large financial awards and settlements over the past 10 years, developers, their capital partners and insurers are reluctant to move forward with projects on the drawing boards. We have identified five significant new Denver area condo developments in the planning stages. All of these are targeting luxury price points – only a few units in these projects will be priced under $500,000, and none of them have yet started presales.Condo Market Outlook: In our recent condo development studies we have documented adequate demand at the luxury price points required to justify the high costs and litigation risks associated with these new projects. However, until the defects litigation environment changes, only minimal condo development can be expected at affordable prices.

    Colorado courts may one day open the floodgates: One lawsuit working its way through Colorado’s court system may ultimately provide some relief from the litigation straitjacket that currently stymies condo development. When writing the condo declarations for the Vallagio condo development, the builder included provisions to require that disputes over construction defects be resolved using an arbitration process. Although the condo declarations also stated that this provision could not be amended by a future HOA board without the builder’s approval, shortly after control was turned over to the HOA the board of directors removed the arbitration clause anyway and proceeded with a class action lawsuit. The latest chapter in this saga was a strongly worded decision in favor of the builder by the Colorado Court of Appeals. The plaintiffs appealed the decision in mid-2015, and on June 20, 2016 the Colorado Supreme Court agreed to review the core issue in the case. At best, it will now be at least until the middle of next year before either the court rules in the Vallagio builder’s favor or the 2017 state legislature finally provides some relief.

    Condo market outlook: In our recent condo development studies we have documented adequate demand at the luxury price points required to justify the high costs and litigation risks associated with these new projects. However, until the defects litigation environment changes, only minimal condo development can be expected at affordable prices.

    Contact us to learn how the market supply and demand forces in play for a specific submarket will affect the feasibility of your proposed condo project.

    Mike Rinner, Senior Vice President


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