Alaris Properties, LLC
Alaris Properties, LLC

Main Content

Is Marijuana affecting home sales?

With Colorado’s economy continuing to show sustained economic momentum, the price of homes continues to rise and the average days on the market continues to surprise us. As it stands, the Colorado economy is outperforming most of the rest of the nation. We have been asking why.

There are many contributing factors to Colorado’s superb economic performance. Four-fifths of Colorado’s economy comes from service industries. Interestingly, private health care, hotels, ski resorts, engineering firms, legal services and software lead the way. Finance, insurance and real estate come in a close second. The economy is rounded out by manufacturing and mining. Suffice it to say that Colorado is growing at a rapid rate and we are projecting the need for more new housing starts. This points to another factor we are watching. The trade war has the cost of lumber up about 40% at the moment, so the cost to build is higher.

There is another economic driver that could be contributing to economic upturn — marijuana sales. Distribution and grow facilities have snapped up some commercial real estate and they are also contributing to the tax base. Much of the commercial real estate that sat around for months or even years is now full and making money. It seems some are reticent to talk about the effect that sales will have on our economy and on real estate in general. However, we do know that marijuana sales have added to the Colorado tax base and this, in turn, is assisting the state with growing its infrastructure.
Economic Inquirypublished research in June, 2018, that shows retail sales of marijuana caused the price of homes to go up by approximately six percent. See https://onlinelibrary.wiley.com/doi/abs/10.1111/ecin.12556.

Let’s face it, marijuana has upsides and downsides and the debates are raging on. We are not going to weigh on the propriety of the marijuana industry. Instead, we are reflecting on the state of the economy and the current real estate inventory and pricing that may have been affected by this recent change. We want our clients to be educated on the impact of various factors that affect a solid real estate decision.

Here are some facts:

  • Metro Denver’s economic growth outperformed the national average in 2018;
  • The region’s population growth remains brisk;
  • The region continues to report higher personal income, stronger retail sales and increased real estate construction (both residential and commercial);
  • With a 10-mile radius of the Genesee Town Center, where the Alaris office is located, at end of January, 2019, there were 392 homes on the market, with the median price over $523,000. This is the highest median price we have seen in a long time; and,
  • The average days on the market in the same 25-mile radius was 25 days during the same period.
  • The bottom line is that we anticipate seeing real estate prices rise for the foreseeable future and marijuana sales driving our economy upward may have something to do with it.
  • There are murmurs of an economic slowdown and a potential for real estate prices to go down; however, those predictions seem to indicate that the market will not start to reclaim some value until 2021. Many things can influence this, including the potential for mortgage rate hikes and lowering consumer confidence. We know that luxury sales are down, and this typically points to a lowering of consumer confidence.

If you are thinking that the time may be good for you to sell your home, call one of our highly trained real estate professionals to assist in gathering appropriate information. We are here to help you.

Jon P. Terry, JD, CMAS, Realtor®
Alaris Properties, LLC