Marijuana millionaires push Denver properties high
Cannabis industry is impacting the top-end but mid-range homes are in short supply in the Colorado capital
For many house-hunters, the whiff of marijuana smoke drifting down the street would ring alarm bells — a sign that a neighbourhood had finally turned. In Denver, the signal may not be so reliable. Since 2014, when Colorado became the first US state to legalise recreational marijuana sales, the number of dispensaries in the city registered with Weedmaps — a sort of Google Maps for local marijuana shops — has nearly doubled, to 276.
Even in the smartest areas you will never be far from a fix. Country Club, one of the city’s plushest neighbourhoods, boasts four dispensaries. Increasingly, buyers considering a purchase there will have an interest in the trade, too. A growing number of customers are newly-minted marijuana entrepreneurs, who have made their money through dispensary sales or growing, says Jill Schafer an agent with Kentwood Real Estate, a local firm.
The marijuana millionaires join the company executives who can afford homes in Country Club (the median sale price was $2.8m in the year to July, according to the Denver Metro Association of Realtors).
Buyers in the area are typically families drawn to the downtown location and large lot sizes. They also like the old-money heritage, says Schafer: in the Capitol Hill neighbourhood, adjacent to Country Club, is Crawford Hill Mansion, once home to Louise Sneed Hill, the turn-of-the-century socialite who created the city’s first Who’s Who. “The unsinkable Molly Brown” — another socialite and a Titanic survivor — lived nearby.
“These areas are where the blue blood has been for generations,” says Schafer. Owners will typically have a second home in the mountains — Vail or Breckenridge — and often a third in Arizona or California. In Country Club, Sotheby’s International is selling a six-bedroom house on East Third Avenue for $4.25m, 5 per cent less than its initial listing price. Kentwood Real Estate is selling a four-bedroom house on East Fourth Avenue for $1.895m, a discount of 17 per cent on its original listing.
These price drops are no coincidence. Although Denver’s healthy economy is continuing to mint top-end homebuyers — 1,294 homes were sold for $1m or more in Denver in the year to July, a 29 per cent increase on the year before — high levels of supply are keeping prices in check.
“Developers have concentrated their efforts on high-value homes because that’s where they could make the most money,” says Ron Throupe, an associate professor at the University of Denver. Median prices in the $1m-plus market increased just 1.2 per cent, according to DMAR, against a 9.9 per cent average increase across all properties on the Denver market.
Developers have given less attention to the middle and low-end markets, where margins are smaller. Higher materials prices — a trend exacerbated by President Donald Trump’s steel and aluminium tariffs — have further disincentivised them. The result is that Denver’s scarce midmarket homes are becoming unaffordable for many. New arrivals, attracted to Denver’s strong economy, are encouraging “super-charged gentrification” in many areas, according to Andrew Friedson, assistant professor of economics at University of Colorado Denver.
Marijuana is the latest in a list of industries that have helped Colorado’s capital — which accounts for more than half of the state’s 5.6m population — prise its economy away from a dependence on the energy industry, which has long taken advantage of rich mineral reserves in the nearby Rocky Mountains.
“This has been the first cheap oil cycle where the state and the city has continued to grow,” says Friedson. The city’s other emerging sectors are finance, aerospace, healthcare and technology.
Economic diversification has combined with the traditional appeal of the outdoor Colorado lifestyle and Denver’s cultural cachet — it houses many nationally significant museums and the performing arts centre is second only to New York’s Lincoln Centre in size. The result has been large-scale inward migration: Denver’s net population growth last year was 1.4 per cent; in 2016 it was 1.9 per cent; for the previous five years it exceeded 2 per cent, according to US Census Bureau data.
Companies have been arriving too, attracted to well-educated graduates and the favourable location, accessible from major cities on both eastern and western coasts. With people arriving more quickly than employers, however, wages are stagnating: “Real wage levels have been flat for the last two years,” says Friedson, adding to the problem of unaffordability in the mid-market.
Friedson’s own experience bears this out. When he arrived to teach at the university in 2012 he found the area, on the western side of Denver’s downtown, too edgy. Since then, developers there have been hard at work on “scrape and build”, says Schafer. The firms typically take half a dozen plots at a time, raze ordinary-looking homes from the 1940s and 1950s and replace them with new builds, such as the one-bedroom apartment available for sale on West 33rd Avenue for $499,000 with Tim Aberle of Thrive Real Estate, a local agent. All this has helped put median prices firmly out of range for the salary of a young professor. “Today, there is no way I could afford to live there,” says Friedson. It’s enough to make even the most motivated graduates head down to their local dispensary to turn on, tune in and drop out.
Buying guide
The average house sale price in Denver in July was $417,500 according to the Denver Metro Association of Realtors
The average number of days on market for a Denver home in July was 20, the same as a year earlier, according to the Denver Metro Association of Realtors
The annual property tax rate in Denver County is 0.56 per cent
What you can buy for . . .
$500,000 A two-bedroom apartment on Umatilla Street, Highland
$1.5m A four-bedroom townhouse in Lower Highland
$5m A five-bedroom detached house on half an acre in Country Club