It’s no secret that Denver real estate values have been on the rise, especially over the last five years. If structured correctly, your home could be sold in a matter of days. However, where are you going to move? Buying in Denver can be quite competitive as inventory stays historically low and median home prices continue to creep up.
In the last several years, many homeowners have seen their home values increase by $100,000+ within two years. Will this always be the case? We’ve compiled a few note-worthy facts about Denver real estate to lend perspective to Colorado’s real estate landscape.
- According to Colorado Home Realty, “The average single family resale home in metro Denver was $441,172 in 2016. Go back 40 years to 1976 and it was $39,740! A third of that increase has come in just the last five years.”
- Also according to Colorado Home Realty, “Homes are more affordable today than they’ve been for 34 out of the last 43 years”. This may seem counter-intuitive, but the calculation is based on mortgages as a percentage of average household income. The example used in the article explains that in 1979, the ratio of payment to income was 64%, versus in 2016, the ratio of payment to income was 38%. This is based on many averages, but creates an interesting point of view.
- A mid-2017 report from Your Castle Real Estate states “Our market inventory continues to be near record lows, with only 7,081 single family homes on the market as of June 30 2017 (16,000 – 18,000 is considered a balanced market).” When supply is low, prices increase. What would inspire an increase in supply to help create balance with demand? One option is building new homes. Colorado builders are expected to pull 23,700 single-family permits in 2017 and 26,000 in 2018, according to the University of Colorado’s Colorado Business Economic Outlook. While that looks robust compared with the sluggish pace of homebuilding seen after the recession, the CU forecast notes that builders pulled around 40,000 permits a year in 2004 and 2005, when there were 1 million fewer people living in the state.
- The Denver Post takes a more practical view of the difference in price point: “More than 60 percent of the homes on the market in Denver are in the top third of the price distribution, while just 15 percent are in the bottom third, according to Zillow.” This issue makes home buying under $500,000 especially difficult from a competition standpoint. 5280 magazine sums it up nicely with their Panic Meter:
Your budget: $1,000,000+
Your level of panic: Low. You could find your dream home—and actually buy it.
Your budget: $750,000 to $999,999
Your level of panic: Moderate. There are houses available, but you’ll still need to match list price.
Your budget: $500,000 to $749,999
Your level of panic: High. You’ll be competing against more buyers than usual due to people stretching their budgets to get into a less intense section of the market.
Your budget: $499,999 and below
Your level of panic: Very high. You might find the perfect house, but so will 20 other buyers.
- Contrary to popular media, millennials are “getting off the couch” and buying homes. A mortgage company reports “According to an industry-wide analysis, millennials accounted for 43% of all mortgage requests in Denver, between August 2016 and February 2017.” This statistic may help sellers understand the buying pool and how to structure a sale.
Buying a personal residence or an investment property is not a decision to take lightly and we suggest visiting with a CERTIFIED FINANCIAL PLANNER™ to see how the decision fits within your personal financial goals. Call Sharkey, Howes, & Javer at 303-639-5100 to schedule a complimentary consultation.