Trends in the Denver, Colorado Housing Market Area
HUD’s Comprehensive Housing Market Analyses provide information on changes in local economies, housing markets, and populations and provide 3-year forecasts for demand in the area. This article is part of a series that sheds light on the content of these analyses.
Denver, the capital of Colorado, sits just east of the Rocky Mountains in the north-central part of the state and has a population of about 2.8 million people. Economic growth in the Denver housing market area (HMA) has been strong for several years and should continue to grow, with construction picking up throughout the area to meet the rising demand for housing. The expansion of the FasTracks light rail system will connect neighborhoods to the downtown region and help alleviate the area’s tight housing market. A recent comprehensive housing market analysis of the Denver HMA detailed economic and housing market activity in the area.
The economy of the Denver HMA is strong, growing by 2.3 percent annually since 2010 — faster than the national average of 1.8 percent. From 2015 to 2016, nonfarm payrolls in the HMA grew 3.1 percent, adding 42,300 jobs for a total of 1.43 million jobs. The largest employment sectors are professional and business services, wholesale and retail trade, and government, which make up 18 percent, 14.5 percent, and 13.6 percent of jobs, respectively.
The mining, logging, and construction sector experienced the highest percentage of growth over the past year, increasing by 6,300 jobs (6.7%) for a total of 100,400 jobs. Construction activity will continue to be strong, fueled by residents’ demands for multifamily housing, continued expansion of the Regional Transportation District’s FasTracks light rail system, and planned projects for the World Trade Center Denver and University of Colorado Denver.
The professional and business services sector added 9,000 jobs during the 12-month period ending in September 2016, increasing by 3.6 percent to 258,600 jobs. The report notes that growth in this sector is due in part to increased interest in renewable energy. The National Renewable Energy Laboratory is in the HMA and employs more than 1,000 visiting researchers and contractors.
The Denver HMA is part of the Rocky Mountain region (HUD Region 8), which has experienced overall growth, although to a lesser extent than that of the Denver HMA. From 2015 to 2016, nonfarm payrolls increased by 1.8 percent in the region, adding 99,700 jobs for a total of about 5.71 million jobs. Colorado added 61,000 jobs during this period, the most of any the state in the region. The region’s unemployment rate ranged from 2.6 percent to 4.7 percent, averaging 3.0 percent during the period. The sectors experiencing the highest job increases were construction (14%), education and health services (3.7%), leisure and hospitality (3.6%), and professional and business services (2.6%).
Few homes were for sale in the region from 2015 to 2016 relative to demand, resulting in a tight home sales market during the period. The growth of Denver’s economy and population have increased demand for housing in the area, which, coupled with low home inventories, have caused area home sales prices to rise. Home sales prices in the Denver HMA were highest in the Rocky Mountain region, increasing by 9 percent from 2015 to 2016. Despite the rise in home sales prices, the report notes that the area’s low home inventories have made homeowners wary of selling their homes, further limiting the number of home sales listings in the area. Demand for housing in the Denver HMA is expected for 34,850 new homes.
Overall, relatively few rental units were available in the Denver HMA rental market, which had a vacancy rate of 4.1 percent in 2016. However, the apartment market was balanced during this period with a vacancy rate of 5 percent, meaning that the market was meeting renters’ demand for apartments. Apartment rents increased by less than 4 percent from 2015 to 2016. Demand is estimated for 20,900 new rental units. Currently, 6,500 rental units are under construction, and an additional 4,350 units are planned within the next 3 years, which will help meet demand for housing in the area.
The Denver economy continues to grow, increasing the demand for area housing. Although home sales prices are high and the housing market is tight in the Denver HMA, new construction of multifamily units and the expansion of the light rail system should help to meet this demand and balance the housing market in the Denver HMA.