As Rental Rates Continue to Rise, Denver's Landlords Aren't Selling Their Properties

Posted by West + Main Homes on Tuesday, July 17th, 2018 at 6:26am.

If you've been shopping for a home in the Denver Area lately, you know that inventory is still really low and homes that are priced right and show well are selling very quickly. There are many factors that combine to explain our current Seller's Market...and this is one of them:

Bill McBride, an economist famous for predicting the housing crisis of 10 years ago, said the wave of rentals is “one of the key reasons inventory’s been low and will probably stay historically a little low.”

Across the country, 3.9 million single family homes have been converted from owner-occupied to investor-owned rentals since the Great Recession. In the Denver metro, there are 102,587 single family homes believed to be rentals, according to Attom Data Solutions.

Many of the investors McBride has talked to aren’t going to sell the properties back to the market, even with rising prices.

“If they sell a property they have to pay capital gains then they have to find a place that returns something better than what they were getting, and in general, that’s hard to do right now,” McBride said.

That’s true for Denver investors who are enjoying a 50 percent jump in rents in since 2012, according to numbers from a University of Denver/Apartment Association survey.

Many of these investor-owned homes would be affordable units for first-time homebuyers if they were on the market. Those potential buyers, looking to grow their wealth or stabilize their housing costs, simply have no options now.

“The problem is the homeownership rates are falling and it’s creating haves and have nots,” said Lawrence Yun an economist with the National Association of Realtors. “This is an undesirable situation. So, the only way to provide more opportunity for the first-time buyers is to bring more inventory.”

The simple solution is to build more homes, but home construction is still below pre-recession levels — though there’s small signs of life in Denver if you look at the building permits.

Real estate investor Charles Roberts admits the current dynamic in Denver is a good trend for landlords like himself.

“Renters are definitely victimized right now,” Roberts said. “And their choices are buy a house, which is tough. Even though interest rates are still low, they’d have to buy a house at very high prices, they can get a second job or a third job or they can move.”

Read the rest of this story on Colorado Public Radio's website.

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