The fast-growing home market in the Denver metropolitan area has raised many people's anxiety levels, as they fear that the boom might turn to a new bubble. The Denver Post's Aldo Svaldi speaks to housing expert Krishna Rao, research director at Zillow, and discovers that the Denver single-family market remains pretty strong. Those looking for a bubble should instead focus on metro Denver's multifamily rental market. Svaldi writes,
"A decade ago, Denver-area builders requested about 15,500 permits per year for single-family homes. After the crash, the number of permits averaged only 6,000 a year, although it has since moved closer to 10,000 a year, still below historical averages. By contrast, more than 31,000 multifamily permits have been pulled the past four years, a record-setting pace.
And new units are expected to keep hitting the market even though more supply means landlords are being forced to dial back on rent increases and provide heftier concessions. Strong in-migration, especially among young adults more likely to rent apartments, justified the emphasis on apartment construction, Rao said in his analysis.
The shift away from ownership to renting after the housing bust also justified more multifamily. Renters, who were 47.5 percent of all households in 2010 in metro Denver, now represent 51.9 percent of the total, according to Zillow. But Rao argues that too much multifamily inventory is hitting the market too fast, pushing up vacancy rates and driving down rents. He said oversupply will only get worse, given the long times needed to plan and complete apartments."