Denver metro area for-sale housing stock at an all time low, part of nationwide pinch, analysts say

This article from the Denver Post hits the nail on the head regarding why we are in such a tough spot for housing.  We are effectively in a negative feedback loop .  Little new Development is available to sate the baseline demand from home buyers.  Lack of inventory drives up demand, causing  prices for the available inventory to increase, while wages fail to keep pace with the price increase.  Builders unable to meet the fat part of the demand curve, because development costs are too high, can only build high-end product, which only a limited number of buyers can afford, and we start again…

The solution comes in the form of either seeing wages rise to the point where buyers can afford the cost of the new construction (very difficult to make up the gap), or costs have to drop (which requires cheaper labor/materials/land/regulatory fees OR greater density!!).

One of the big cost drivers is the regulatory cost/fees associated with new development.

I’m currently working with a buyer looking at land for residential development in the NW metro area.  Tap fees for water and sewer are over $30,000/home!!!

How does that carry to the bottom line of the price tag on a new home??  – It accounts for up $100,000 to $200,000 of the finished home price in a market where home prices top out at $700,000!!!

What does this mean for those who have homes?  It makes it tougher to move and makes the prospect of remodeling/expanding your existing home the most feasible alternative.  Its an increase your equity at the cost of mobility.

What does it mean for the City?  It makes it tougher to attract new business and continue growth.

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