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If Amazon brings its $5-billion second home to Denver, how would the ultimate disrupter change the metro area’s housing market? Would we become a second Seattle, where the median single-family home price just hit $757,000 in January 2018, and where rents have skyrocketed by more than 50 percent since 2009? Kerron Stokes, managing partner at Resource Group at RE/MAX Leaders, isn’t convinced. Here, he explains what we might realistically expect—and how we can prepare.
5280 Home: Amazon says it will hire as many as 50,000 employees for its second corporate headquarters (HQ2). What impact could this new population have on Denver’s housing market?
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Kerron Stokes: Understanding what this will mean for housing is challenging because there are still many unknowns: We don’t know if the influx will happen in phases, and we don’t know how many of the 50,000 jobs would be sourced from inside Colorado—but I don’t anticipate Amazon landing an aircraft with 50,000 people from out of state. If Amazon is looking to source from inside Colorado, especially initially, there may not be a dramatic shift in housing at first.
If Amazon’s HQ2 did accelerate the metro area’s population growth, what segments of the housing market would feel the impact first?
I would expect to see the largest and most immediate impact on the rental market, because people relocating here often aren’t familiar enough with the different communities to commit to buying a home right away. For example, we saw that many of the employees who came to the [new Lone Tree] Charles Schwab campus from around the country rented for the first year to 18 months. Then, after they familiarized themselves with the city, they began the process of buying a home in their second year. Generally, as the rental market climbs, it promotes home-ownership because people get to that point when they ask, “Why am I renting when I could buy?”
Amazon has said its average HQ2 employee would earn more than $100,000 a year. What are the implications of so many new high-paying jobs?
It will likely create some “move-up” buyers who are looking for different or larger homes to support their changing lifestyles. As they sell their homes, inventory in that first-time homebuyer category—within the $250,000 to $450,000 price range—which has been pretty limited for the past few years, may start to become more available.
(Read more about Amazon’s decision to pick Denver as a finalist for HQ2)
According to an analysis by Regional Economic Models, Inc. (REMI), home prices in the winning market would increase by as much as 6 percent a year if Amazon hires new workers quickly. Do you agree?
I always question those statistics. If Amazon’s HQ2 were to land in St. Louis or Miami, it would have a dramatically different impact there than in Denver. We [RE/MAX] would rather not run to the numbers, but instead take a position on how we as a city can be more prepared.
How prepared are we?
A lot of things are in the works: We’ve attracted a lot of large developers and smaller infill builders who are working right now to meet some of the consumer need; a lot of developers are building to the east and north of the city, and a bit down south as well. I think as long as there was a phased approach [to Amazon’s hiring], we would have the ability to absorb those newcomers. But it would take some creativity from all [the surrounding] municipalities—including Lakewood, Littleton, Thornton, Northglenn, and Aurora—which would need to work together to continue to create a favorable environment for that development.
How can they foster that environment?
I think they would have to promote a lot of discussion with existing residents. In historic districts, there will have to be a lot of conversation about how to preserve the culture and heritage of those areas. They will also have to ensure there’s good dialogue—and some timely decision-making—within the permitting and building community, to make sure that permits, blueprints, and developer plans are being reviewed in a timely fashion to keep pace with growth. There also may need to be some reconsideration of zoning ordinances that might be a bit archaic, so there can be more productive growth in outlying communities.
How broad, geographically, could the HQ2 impact be?
I am of the opinion that any significant business complex the size of Amazon’s would accelerate the already rapid growth between the major cities along the I-25 corridor. With the population and job growth, the need for housing and commercial amenities would need to be filled by developing the suburban and rural communities to the north and south.
Is our infrastructure ready for Amazon?
I think one of the reasons we’ve been recognized on the international stage by a company like Amazon is that our infrastructure isn’t just road-based. We have some of the best trail and bike systems—and bike laws that are favorable to pedestrians and bike commuters—in the country. Think about how the Highland, Sloan Lake, and [Berkeley’s] Tennyson Street communities expanded once the pedestrian bridges over I-25 were completed. I see that infrastructure increasing, in addition to light rail extensions.
When you factor in the potential challenges and benefits, would HQ2 be good for Denver’s housing market?
The long-term result of Amazon moving here would be validation as a city on the international stage, the fusion of cultures and expansion of ideas, the growth of amenities to service the new population, and a diversified economy. Denver’s economy is so dependent on our small businesses, and [HQ2 would bring] an infusion of people with higher incomes spending back in our communities. That’s the upside, but it won’t come without short-term sacrifices and pressures on our services, systems, and infrastructure. But in the long run, I think it would be good for the metro area.
If Amazon chooses Denver, how can home-sellers looking to cash in make their properties most attractive to an Amazon transplant?
Our counsel to clients is the same whether Amazon comes or not: Make sure you’re not deferring maintenance on your home—and budget for those fixes. Keep up with the regular service schedule on your furnace, get periodic roof inspections, and don’t delay in addressing things like hail damage. Simple maintenance issues can make your home more or less attractive than another property, and deferred maintenance costs can be hard to deal with when you’re getting ready to sell.
What advice do you have for buyers who may begin competing with Amazon employees for homes?
Examine your buying power now, and work with a licensed Realtor who has mortgage lenders who will work with you on understanding what you can buy. Every city is different when it comes to first-time home-buyer programs and HUD loan limits. The more well versed you are on the financial side of your life, the more able you’ll be to buy when you want to. That said, it’s also important to understand that it may be better to wait six months until you can repair your credit and qualify for a lower interest rate, or have more money for a down payment, which will make you more competitive.