Did Marijuana Make Denver the New Silicon Valley?

Over the last two years, the Denver real estate market has seen a dramatic change. Although a number of factors have contributed to this development the two main reasons are that many people are leaving Silicon Valley because they cannot afford to live there and the Colorado legal marijuana industry has created a number of profitable business opportunities for entrepreneurs.

For the first time ever, the median price for a home in Silicon Valley exceeds $1 million. This means that the average price for a home is approximately double what it is in cities like Boston and Seattle, and triple the price of an average home in Denver, Portland and Austin.

In March, Denver experienced the second-largest jump in annual home prices at 10%, just behind San Francisco. The average home price in Denver has increased by double-digits and there has been a dramatic decline in inventory.

James Paine is the managing partner at West Realty Advisors. Paine said, “There has been a huge bump in real estate prices due to the legalization of marijuana. It’s massively pushed up raw land and industry prices.”

Denver’s improving labor market

The legal marijuana industry has created countless job opportunities in Colorado which has contributed to the growth in the number of people moving to the state. Many ancillary businesses have seen increased demand due to the rapid growth of the cannabis industry. Some of the greatest beneficiaries of this growth have been in security, HVAC and irrigation companies,

“The pot industry is creating jobs we didn’t have before,” said Kelly Moye, a Re/Max real estate agent who has worked in the Denver area for 24 years. “It’s brand new, it adds a whole new factor to the area; you have real estate needs, housing needs, job needs.”

“Electricians have grown from mom and pops to big-time electric companies,” said J.P. Speers, an agent at ‎Berkshire Hathaway Home Services.

Inventory is on the decline

The average home price is increasing rapidly and inventory has experienced a sharp decline. These metrics are leading indicators of a real estate market on the rise.

Before the marijuana boom, Denver typically had around 24,000 housing listings. Now, that number is closer to 4,000. This steep decline is partly due to an increase in the number of people moving to Colorado to take advantage of the rapidly growing cannabis industry.

Many of the people who are moving to Colorado are doing so to access medicines that they currently cannot obtain in their current state. This wave of migration has caused a number of states to revise their laws to enable registered patients access to the medicines they need including cannabidiol (CBD).

Speers said that it is difficult to figure out what enticed a person to move to the state. “A lot of them try to hide it,” said Speers. “They don’t necessarily say they are coming out to be part of the marijuana industry.”

Outlook

As more states continue to deregulate and reform their marijuana policies, the Denver market should see its real estate market come back to more normal levels.

“We are going to continue to see an increase in population growth based on marijuana until other states start picking up recreational laws,” said Speers.

http://money.cnn.com/2015/06/04/real_estate/marijuana-denver-housing-market/