Two weeks ago, Ken and I had the pleasure of attending one of our favorite events of the year-the Annual Vectra Economic Forecast. While we work in and understand the day-to-day real estate market conditions, it is always enlightening to learn about the greater national and local economic forces that affect the real estate world. Thanks to Boulder Vectra Branch Manager, Drew Britton, for the invite!
As usual, we got to listen and learn from Patricia Silverstein, president and chief economist at Development Research Partners, a Colorado-based real estate analysis and economic development research company.
So how is our local economy doing? And what might we expect from the national and local economy in 2020?
Patricia Silverstein gave us some valuable, specific details about the Denver metro and Colorado as a whole. Here is what we learned from her:
- We are still in the midst of the longest economic expansion in modern US history, at 126 months of economic expansion. The prior longest expansion was from 1991 to 2001 (120 months).
- We are in an environment of stable interest rates and we have a competitive local job market. It continues to be difficult to find and retain qualified workers.
- Nationally, 47 states have seen job growth as a part of this economic expansion. Colorado is currently #10 in terms of job growth. In 2020, we will continue to add jobs but at a slower pace than the last few years.
- 2014 was the peak year of growth in Colorado with 83,000 net new jobs added in the state as a whole and 55,000 jobs added in Denver. Our growth rate now is about half of that. In the coming year, we will continue to add jobs at a higher rate than national level.
- Boulder is expanding and adding jobs at the fastest pace state wide. This job growth is related to technology and software.
- Greeley is also growing at a fast pace and that is due to their renewable energy sector. Fort Collins, Colorado Springs, and Grand Junction are also seeing positive growth. Denver is growing at a slower pace than in years past.
- In the growth cycle of the 1990’s, Colorado added 680,000 jobs and that was 3.7% average annual increase. Only 2 counties lost employment during that time. During this economic expansion, Colorado is experiencing a 1.5% average annual increase. In the current 10 year period of expansion, 23 counties’ employment base is lower than 10 years ago. 99.2% of jobs that have been added, have been on the Front Range. These numbers indicate some parts of our state are being left behind in this time of expansion.
- In Metro Denver the largest job sector that is adding jobs is in the professional and business services sector. This sector includes jobs like accounting, legal, and software positions. Wholesale and retail is the slowest growing sector. Transportation and warehousing is the fastest growing sector. This includes our warehousing and logistics industry and is due to the Amazon fulfillment centers that have been built in Denver.
- Challenges to continued expansion will be finding and holding on to qualified workers. The good news for employees is we are seeing an increase in wages. Between June 2018-2019, Colorado had second fastest increase in wages in the country.
- The housing market continues to be strong due to stable, low interest rates, rising wages, and net population growth.
- From 2010 to 2019, Colorado was the 3rd fastest growing state with regard to population gain. From 2018 to 2019, we were the 8th fastest growing state.
- In Metro Denver we are seeing a slower net migration. During the peak years for migration to our state, we were adding 43,000-45,000 people per year. In 2020, the Denver metro will add about 38K new people to the area.
- In the 90’s, 5 counties in Colorado saw net population loss. In the last 10 years, 20 counties in Colorado had net population loss and 13 counties were flat in terms of population gain. Again, these numbers indicate that while the Front Range is strong in terms of economics, jobs, and population gain, there are other parts of the state that are struggling.
- Boulder is now the 7th most expensive housing market in country. Denver is now the 11th most expensive housing market in country.
- Home appreciation rates are starting to slow a bit which is good for affordability and the ability of local companies to continue to attract workers. We saw about 3.5% year-over-year average home value appreciation in the Denver metro. Home appreciation is now better matching wage rate increases.
- We are seeing more stable lease rates and average home appreciation because after years of very short supply, new construction finally has caught up to consumer demand.
If you would like to watch the full video presentation that Patricia gave, you can watch here.
All in all, the gist of Patricia’s presentation was that the years of unprecedented expansion in the Denver metro are likely behind us. As we move forward, our local economy and real estate market remain strong and we can expect some time of more measured, reasonable growth for our area. At the same time, there are parts of our state that have not experienced the same growth as the Front Range and it is important that policy makers and the leadership at the state level take this into consideration and try to help the areas of our state that are experiencing challenges.
If you are interested, I recommend watching the video for more context and to see the visual aids presented. If you do, let us know what you think!
Until next time!
Allison and Ken