After years of having at least one development, if not two or three, on the list of the 50 best-selling master-planned communities in the country, Colorado failed to make the cut in 2022, according to an annual update from real estate consulting firm RCLCO.
Making the list reflects both a community’s popularity in drawing new residents and its ability to house its population. In some ways, it is a measure of a region’s homebuilding capacity. Many states never make the cut.
Metro Denver and other Colorado metros continue to remain attractive destinations for in-migration, so the lack of a hot-selling community shouldn’t be taken as an indication of poor residential demand, said Karl Pischke, a vice president at RCLCO. But it does appear the state is struggling to entitle large-scale communities, complicating the replacement of the big communities that are selling out.
Unlike Florida, Nevada and Texas, Colorado never dominated the list of mega-communities, but it was a contender. RainDance in Windsor tied for 20th in 2021 with 683 sales, but it is largely built out and had only 100 sales this year. Banning Lewis Ranch in Colorado Springs made the cut at 26th in 2020.
Stapleton, now Central Park, claimed the 15th spot in 2019 with 604 sales and three others in Colorado qualified as well that year — RainDance, Banning Lewis Ranch and The Meadows in Castle Rock. In 2018, Stapleton ranked 10th and Green Valley Ranch was 46th on the RCLCO list.
So what changed? One reason that Colorado communities are not making the cut is that many of them were built out, and for a variety of reasons, builders are having a harder time building a single community on as epic a scale as they did in the past.
Sterling Ranch, in Denver, just missed the cut-off for this year’s rankings with 326 total sales. That pace represents a decline of about 30% compared to the 471 sales in 2021. Sales in the 50 largest communities were down 20% last year, mostly because of higher interest rates, according to RCLCO.
The Common Sense Institute estimates Colorado builders need to pull between 20,000 and 46,000 permits a year through 2025 to close the gap in the state’s housing stock and keep up with future population growth. They finally started to get close in 2021 and last year, but have pulled back hard in recent months.
Pischke said the shortage of housing has contributed to much stronger price gains in metro Denver than in other places where builders are better able to keep up with demand. New home price increases got so out of whack that they effectively killed demand to a greater degree in Colorado, especially after interest rates started spiking in the second half of the year.
Buyers were already being stretched to the limit and higher interest rates caused them to snap and cancel purchase contracts on new homes in large numbers. Builders pulled back sharply in the second half of the year as a result. Colorado’s inability to build enough new homes in the past, which contributed to prices rising so much, could make it harder to build enough new homes in the future unless people stay away from the state because of a lack of affordability or home prices tumble, which they are starting to do.
Pischke also suspects the difficulties developers have in entitling large blocks is also at play. Colorado has shifted from mega-developments like Highlands Ranch and Central Park to smaller communities. And because they are all competing with each other for sales, it makes it harder for any one community to make the top 50 list.
“Securing a significant amount of entitlements, particularly in metropolitan areas such as Denver, can be a challenging hurdle to overcome. So in a market like Denver where demand far outpaces supply, prices can be driven up significantly, making it difficult to achieve a meaningful sales volume,” Pischke said.
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