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.