Condo Legislation Killed in Procedural Move
For those who were watching the progress on the new construction defect and Home Ownership Bills that were put before the State Judiciary Committee the outcome is easy to report. Nothing will be happening. According to the Denver Post article “Procedural move kills last of three Colorado construction-defects bills” the bill got squashed. We aren’t here to debate whether this was the right bill or not to help encourage condo development. Perhaps a better bill is yet to be written, one that can make both sides of this debate. But what is disappointing is the news that whatever seems to be stalling the construction of new high rise projects from breaking ground may continue for months or years.
Benefit of New Projects
New Condo Projects are great! They are great opportunities for buyers in a strong market, which is what we see in Denver right now. For example when SPIRE and Glass House first came on the market buyers could put a one bedroom condo under contract for as low as $150K.
There are several factors that work to create such attractive pricing. Often the Developer is motivated to get a certain number of units under contract (usually 30% of the building) so they price some of the lower floors and smaller residences more aggressively.
Plus, buyers are being asked to buy off of floor plans and renderings with a construction completion date that may be years down the road. For that risk factor Buyers also often see a discount in pricing. This is part of the reason the first to make that leap of faith in a project can often have a lower price offering. Developers often raise prices as they move through the sales at certain benchmarks, such as the 30%, 50% or 70% milestones.
Why are developers motivated to reach these milestones? It is because they often have certain requirements with their lenders and investors. Hitting such requirements can often be buying opportunities our team helps to identify.
But all of this is academic if new condo developers don’t build a new high rise project. Recent legislation was put on the books in an attempt to try and create a marketplace that encourages development. Now we aren’t lawyers or legislators so while I am sure there are many pro and con points about the proposed Homeownership Opportunity Act SB 14-220 we discussed here, the end result was that it did not get passed.
And the topic for today is how will this affect the market over the next few years.
How will this affect the market
No one has a crystal ball to predict the future. Supply and demand would probably predict that getting into a high rise building with amenities such as SPIRE, Glass House, or ONE Lincoln might get more competitive. These units are already so popular, with swimming pools, fitness centers, movie theaters and more part of your home ownership benefit. Prices have already been going up, days on market going down, and the Denver Urban team’s job never stops in staying current and up to date on inventory to help our clients get the best opportunities with new listings.
Denver is still growing, and that is the Demand side of the equation. Without at supply side increase these units will likely stay among the most desirable and sought after. This might also continue the fast paced development of mid rise, townhome, and single family home projects.
According to the Denver Post article quoted above
“Condos represent only 2 percent of the new housing mix in metro Denver, versus 20 percent in other areas. When California shifted from a litigation to an arbitration model of dispute resolution, it saw condo construction rebounded from similarly low levels, backers argued.”
Read more: Procedural move kills last of three Colorado construction-defects bills – The Denver Post http://www.denverpost.com/business/ci_25707252/procedural-move-kills-last-three-colorado-construction-defects#ixzz31iQVIZML
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2 percent is a drop in the bucket compared to the number of folks who are seeking the amenity rich lifestyle these Denver Urban buildings offer. At some point market demand may create a large enough incentive to draw Developers back into the new construction process for a new high rise project. Keep in mind that even once that decision is made it could be years before a project goes through design, approval, construction and sales.
Might be a good time to do a walk through of the existing inventory at the existing amazing high rises our great city has today.
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