A recent study conducted by the Associated Press underscores a national trend propelled by the Great Recession: The gap is widening between homeowners and renters. And the same can be said for Durango.
The analysis, which examined housing data from more than 300 American communities, say homeowners are building equity while renters are drawing further away from a home purchase as they struggle with higher rates.
These post-Great Recession side effects are being felt throughout the country, and an examination of census data at the local level show that some of those problems are prevalent in Durango regardless of the housing bubble bust 10 years ago.
According to the 2010 U.S. Census, 69.1 percent of La Plata County’s housing units were owner-occupied, compared to 30.9 percent renter-occupied. Today, ownership has dropped to about 66.7 percent, while the percentage of renters has climbed to 33.3 percent.
In addition, the percentage of owners spending 30 percent or more of their income on housing has decreased, while the percentage of renters has increased.
Though the traditional standard has maintained that those who pay more than 30 percent of household income on rent or mortgage payments are considered cost-burdened, today that number means little and, in markets like Durango’s, is common.
A 2014 Bloomberg article said the 30 percent rule is a nearly obsolete measuring tool: “If the 30 percent rule ever made sense – which economists contest – it’s almost meaningless now, when almost 41 million U.S. households spend more.”
Today, about 50 percent of all renters dedicate more than 30 percent of their income to monthly payments.
“It’s not unusual for people to pay a higher percentage of income for housing in our market,” The Wells Group broker Don Ricedorff said. “We are in an expensive market, and our labor pool is softer.”
Going back to 2009, in the throes of the recession, a mere 561 homes sold that year throughout La Plata County, which is a little more than half of the 1,098 that sold in 2015. Seven years ago, the market was also overloaded with residential units – about 1,300 or 1,400.
Today, the local housing market has the opposite problem with low inventory. As of last Tuesday, all 100 rental units at Three Springs have committed tenants. Only the week prior, the development was 90 percent filled.
“It was a much quicker lease-up than we expected,” said Tim Zink, real estate portfolio manager for the development. “There’s obviously a strong demand. Whether it’s a demand for housing in general or a demand for new housing, that’s what we don’t know.”
“We didn’t have a lot of new product being built in the recession, but people – millennials wanting their own homes and people moving in for jobs – still wanted to move here,” local broker and city Mayor Christina Rinderle said. “We absorbed the excess inventory, and now we’re playing catch-up.”
Durango City Council recently made two moves intended to stimulate the market: The board supported an annexation of land near Escalante Drive that will make a 192-unit apartment complex possible, as well as an ordinance that will provide protections for townhome and condo developers from the construction defects law.
Meanwhile, the demand drives rents up. The county’s median rent has risen from $944 six years ago to about $1,026, and so have monthly owner costs with a mortgage, from $1,574 to $1,621.
In some ways, Durango’s lack of developable space insulated it from a major contributor to the gap between owners and renters: investment companies bought up mass quantities of real estate in cities like Phoenix and Las Vegas and developed rentals, whereas there were fewer speculative investors in Durango.
Today, the rental vacancy rate is at 2 percent, and data from the Durango Area Association of Realtors show building permits and home sales have rebounded, though Purgatory Resort saw post-recession changes in demand from multimillion-dollar mountain homes to less expensive condos at the resort.
“The recession still had its effect, but Durango didn’t suffer as much as other communities,” Rinderle said. “High quality of life, our diverse economic base helped insulate Durango from the more dramatic effects.”
jpace@durangoherald.com
