Buyers looking for condos in Denver are finding the selection of available properties few and far between.
While the low inventory troubles new-home buyers, the situation is likely to become worse thanks to a mix of forces that are keeping new condos off the Denver market.
A few years ago, if someone wanted to buy a condo, they would have visited a guy like Taylor Bartels, a specialist in converting apartment buildings into condominiums.
But in 2010, business started to stall and Bartels learned a hard lesson.
“We had two three weeks with no showings, we had no offers,” Bartels says.
Suddenly, no one was interested in buying a home as credit had dried up, homeownership had lost its luster and the first-time homebuyer tax credit was over.
So Bartels did the only logical thing: he converted all those new condos back to apartments and sold the building.
“We always joked that we used four of our nine lives getting out of it,” Bartels says.
In the end, Bartels got out of the business altogether. Instead of converting apartments to condos, Bartels is doing something he never imagined: owning and operating a couple of European Wax Centers in the Denver metro area.
“My wife is blonde and she has very fine hair, so she didn’t wax,” Bartels says. “And I didn’t wax anything.”
Now condo demand is picking back up but condo supplies aren’t keeping pace. That's partly because guys like Bartels have left the business.
There were no condo conversions reported in the first half of 2013 in Denver, a figure that is a stark constrast to the 1,300 conversions in 2006, according market research firm Reis.
While economics drove a lot of converters away, Colorado’s strict construction liability laws haven't helped either. These laws leave converters vulnerable to costly lawsuits from condo owners angry about problems with their buildings.
“Until that’s figured out, and people are comfortable and can make it work, I don’t know, even if… the demand’s there, you’ll see the deliveries like we had in the past,” Terrance Hunt of Apartment Realty Advisors says .
But a lack of conversions isn't the only problem, according to Hunt.
“There’s virtually no condo construction,” Hunt says. “I don’t know when you’ll ever see properties like One Lincoln or the Spire for instance, which is 500 condo units, delivered. You just can’t finance that today.”
Hunt believes the real demand right now is for apartments.
The vacancy rate is near a 13-year low, according to the Apartment Association of Metro Denver and the Colorado Division of Housing, driving rents up and making apartment construction the smart investment.
Mark Trenka is a realtor who specializes in condos and lofts in Denver and says all of the building going on downtown can be deceiving.
“We see a lot of cranes out there, and the thought process people have is that's going to be new housing for sale,” Trenka says. “In fact it’s all rental housing.”
Trenka also says the available inventory is currently thinner than he's ever seen -- and that's frustrating for buyers.
Condos are often an affordable choice for first-time home buyers, and without reasonably-priced options, many people will be priced out of the market.
“If you’re ready to spend $700,000 to $800,000 downtown, I can find you some inventory,” Trenka continues. “But if you’re looking to buy for $200,000 to $300,000, there’s not much there.”
And there could be even fewer units in that range since prices have remained in check so far.
But that's likely to change.
“Without additional supplies of condos," Hunt says. "I think we’re going to see rapid growth in that pricing here shortly as well.”
That isn't good for buyers but it is great news for sellers.