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Real Estate Investing In The Legal Recreational Marajuana States

Real Estate Investing In The Legal Recreational Marajuana States

Marijuana is still federally illegal, and thus is still classified by the DEA as a schedule 1 controlled substance - the same restriction that is placed on heroin, methamphetamine, bath salts, etc.  This means that state legalization is going to be a widely debated and contested topic, at least until the federal government recognizes the states sovereignty to make their own laws with respect to it. Until federal funds are no longer allowed to be used to enforce marijuana crimes, legalization within states is going to have a non-trivial effect on real estate markets.

Thus far, there are only two states and Washington D.C. that have legalized marijuana for recreational use.  Those two states are Colorado and Washington.  I'm going to focus on Colorado in particular, just because the real estate there has become extremely highly priced just in the last 4 years alone.  This can't be explained simply from the post-collapse housing recovery that began to uptick in 2012, although that is what can be pointed to from a nationwide perspective.  The real estate market in most states had an inflection point in 2012 coinciding with the front tide of the recovering economy.  Colorado is particularly interesting because it is one of the few states that has since blown their old real estate values out of the water.  Other states have barely turned the corner, or have not done so quite yet and are projected to do so in the next year.  Take Florida, for example:

Average home value graph, can be seen on http://www.zillow.com/co/home-values/

Average home value graph, can be seen on http://www.zillow.com/co/home-values/

Colorado is shown for comparison - FL has had an average real estate value increase of 54% since 2012.  Colorado has had an average increase of 51%.  This reason the number for Colorado is significant is because the state had one of the weakest housing market collapses, with an average home only losing 8% of its value between 2008 and 2012, compared to FL's staggering 41% loss between the same time frame of January 2008 and January 2012.  The net gain between 2008 and today for Colorado is +39.3%, where Florida is -9.1% where it was in 2008.

Florida is a particularly horrific example, but other states tell similar stories.  Can the legalization of marijuana be partly to blame for a youthful, wealthy populous migrating to the state?  I can't say for sure.  But the data suggests that the measures being passed in various states have had positive effects on the real estate market.  The housing market growth in Washington state has closely mimicked the growth in Colorado, despite having a more significant collapse post-2008.  Those average home value has grown 4.7% since January 2008.

It could be coincidence that the two weed states have had net positive recoveries since 2008.

It could be coincidence that the two weed states have had net positive recoveries since 2008.

Currently there are several states that are worthwhile of real estate market investigation, and Arizona is one of them, you can read about DDaves real estate strategy here and here.  As a whole, it hasn't recovered to pre-2008 levels, it is possible that the influence of a measure such as recreational marijuana passing could tip the scales positive for the foreseeable future, and at least until we have a majority of states with legal marijuana and a federal government that reclassifies and decriminalizes the drug as a whole.

Whether you support legalization of marijuana or not, you would be foolish to not consider the economic impact that it might have in your country, state region, county, or neighborhood.

*Update 11/9/2016* - Prop 205 failed in Arizona.  My opinion is that the state is still a good place to invest, although now it may not be as appealing to east-coast stoners as it may have been before the failure of Prop 205.  Consider examining the real estate markets of the other states that have legalized marijuana this election cycle, and give us a comment below on your opinion on the prospect of investing there.

Breaking news - Trump victory has no effect on markets

Breaking news - Trump victory has no effect on markets

Uncertainty breeds contempt... or is that profit?

Uncertainty breeds contempt... or is that profit?