Much has been reported about construction- defects laws in recent weeks, and how they are impacting the local condo market. Despite the potential for litigation, there are a handful of condo developers who are moving forward with their projects, and others who are waiting in the wings to follow their lead. This is due to increasing market demand among people who would prefer to own a condo, as opposed to renting an apartment.
According to research from Metrostudy, there were only 414 condo closings between the first quarters of 2013 and 2014 (post-recession). That’s compared to 3,587 condo closings in the 12 months through the first quarter of 2006 (pre-recession).
Additionally, through 2014, there were only 28 condo sales, and in the year ahead, only one project will be offering newly built condominiums (250 Columbine in Cherry Creek North).
The scarcity of condos is not helping to address pent-up demand, and construction-defects laws are further hindering the hope of more condos being delivered to market anytime soon. As a result, the laws are not only negatively impacting developers, but punishing the marketplace as well.
Contrary to what some studies have reported, market demand is strong, and the ability for qualified buyers to purchase a condo exists. Thirty straight months of double-digit appreciation for home values, combined with low interest rates, is providing further inspiration to people who want to downsize from their homes and move into a comfortable condo.
With new apartment construction at record levels, consumers have plenty of options to rent a residence, but many people would prefer to own. It makes more sense to them financially, and a condo building provides the environment they want, with less resident turnover, outstanding amenities and services, and higher-quality construction. A condo provides more permanence than an apartment building, and delivers the type of product that many people want.
For many, the hope is that state laws will reformed so that condo construction — at all price points — can commence without the threat of unnecessary lawsuits. It’s a product type that’s not only being asked for, but is also needed in many parts of the metro area. So much so, that some metro-area mayors have stepped in to find ways that the construction of entry-level and medium-priced condos can be stimulated in their cities.
Senate Bill 91 has been recently introduced by Sen. Ray Scott, R-Grand Junction. It is aimed at curtailing the period during which a homeowner can bring an action against a builder for faulty work.
Until something changes, market demand will continue to grow, and a very limited number of developers will move forward with projects, implementing numerous quality-control and cost-intensive measures so that they won’t be subjected to litigation. In the meantime, many Denver metro consumers will continue to be disappointed as they shop for a housing product that barely exists.
Peter Niederman is CEO of Kentwood Real Estate. Georgia Gallagher is a broker associate at Kentwood City Properties.
To send a letter to the editor about this article, submit or check out our for how to submit by e-mail or mail.
