Did you ever wonder if legalized marijuana could affect the housing market? A good way to check is to see what is happening to the housing market in Colorado. Marijuana for personal, industrial and recreational use has been legal for almost four years. The verdict is in after all that time, and it clear that it is having a positive effect on both the housing and mortgage market.
According to the Colorado Association of Realtors, single family and co-op sales got a major boost after legislation passed making pot legal in 2014. The dynamic between residential and commercial demand in the state is strong regarding legalized marijuana. When a space is bought or rented to sell legal cannabis, it creates new jobs with people moving to the state needing to buy a home.
Home sales increased in Colorado from 96,000 in 2013 to 99,434 in 2014 and 107,200 in 2015. There was a shortage of housing inventory in 2017. Sales prices have also risen. The median home value shot up from $187,000 in 2011 all the way to $325,000 in 2017. Meanwhile, the population of the state has swelled by 2% since pot was made legal.
In particular, Denver has emerged as the pot capital of the country. The industry has very strong roots in warehouses in northern Denver. Buildings that are used for growing the plant are easy t spot. They have extra lights and security cameras.
The rate of demand for housing in Denver has caught up with the housing supply. Before the new cannabis law, Denver had an average of 24,000 active listings. But now the average number of listings is only 4,000.
Retail spaces are also hot for growing pot in Denver. In 2015, there already were 200 cannabis stores in the city. The spike in demand has been very good for landlords; they may charge two or three times the market rate for spaces that are used for sales or cultivation. It is effectively a tax that these businesses are used to paying because the business is still illegal at the federal level.
New jobs coming into the state from Amazon and Google also have had a positive effect on home prices and home demand.
Rising Demand in New York State as Well
Medical marijuana was approved in New York in 2014. Soon after that, mortgage brokers began to get more inquiries about what is allowed for issuing loans to people who work in the medical marijuana industry.
Now there are employees, including retailers, growers and bookkeepers who want to buy homes, but some of them are having trouble getting credit because of difficulties qualifying people who obtain their income from pot sales and other work with the product.
The industry is very sensitive towards compliance and has some mortgage lenders concerned that attempting to qualifying pot workers for home loans could draw attention from regulators. Banks do not always want to taka risk as far as legal compliance and sometimes are not wanting to do loans with these workers.
Some cannabis workers have trouble getting banking services because of the federal ban on selling pot, even though there are states that allow it. As many as 70% of businesses that deal with the plant at all have trouble getting a bank account. But at least the industry is causing home prices to rise here, which will benefit many of these workers once they are approved for loans.
California Real Estate Also Affected by Cannabis
Cannabis is also legal in California, and this is bringing speculation that the real estate market in Los Angeles will get even hotter than it is now.
A study from realtor.com found that legalizing pot generally in a state has a positive effect on the real estate. It causes home prices to go up, as well as the value of commercial property. The website has collected information from five states where recreational marijuana is legal, and there is a trend between cannabis businesses and increasing home prices. It is expected this will hold true in the Golden State.
Of course, there are many factors that could be causing homes in Los Angeles and California generally to be scarce. But it is believed that legal cannabis will be a growing factor.
The bottom line is that many people did not consider the possible benefits on the housing market that legalizing cannabis would have. But evidence has been coming in for several years that it causes home prices and demand to rise. So, if you are planning to relocate to a state that has legalized cannabis, you could see increased home prices during your home search.
If you work in the legal cannabis industry, you will need to talk to your lender about how easy it will be to get qualified for a mortgage in your profession. This will depend upon the specific laws of that state.