The competitive nature of the Denver real estate market leaves many wondering about housing affordability in Denver. Will you be able to afford to pay your mortgage every month? Is it worth buying a house or should you just rent? Perhaps you should consider moving elsewhere?
It’s true, the housing market in Denver is full of competition amongst buyers. And yes, there is a listing shortage that has created the strongest sellers’ market we’ve seen. However, when you consider the actual housing numbers, affordability in Denver is good despite the competitive offer situation buyers face. Buying a home in Denver isn’t a day at a clearance sale – like in 2012 – but it’s a solid purchase (and that’s backed by data)!
Is Denver Too Expensive?
If you compare the average Denver income, the average home price, and the average mortgage rate, you begin to see how affordable the Denver market is (while taking inflation and income increases into account). This comparable ratio is known as the DTI, or debt to income ratio. Experts explain that 40-50% DTI at any given point in time is affordable.
During the downturn in the early 2000s, home prices fell to an extremely affordable rate. In 2012, Denver’s DTI was only 25%! Currently, we’re just above the 50 year average at about 55% DTI. So, although housing affordability in Denver isn’t at historic lows, home ownership is considered affordable.
The Best Time to Buy a House in Denver
Showings per active listing each month indicate how popular the market is – the more showings, the more buyers! January, February, March, April, November, and December typically experience higher numbers of showings, indicating a busier market. June through October tend to slow down, as the showings data indicates. Therefore, if you’d like to search for a home at times with less buyer competition, mid-summer is a great time to look.
Denver Mortgage Rates
Mortgage rates were very inflated in the 70s. This impacted our market, with less people buying homes. Mortgage rates are very difficult to predict and have been extremely low in recent years (just one factor that has contributed to Denver’s very busy real estate market). Although mortgage rates are increasing slightly from what we’ve been seeing, we’re still close to historic lows.
Denver’s Tight Entry Level Market
The number of days a home spends on the market can indicate the leanings of home buying and selling. Experts indicate that an average of 90 days on market is typical of a balanced market (sellers and buyers share equivalent power when making and accepting offers).
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Lower priced homes experienced very few days on market (around 20), indicating record strength for sellers. As home prices increase, they spend more days on the market. Luxury homes spend the longest time on the market, though they represent a balanced market at just above 90 days on market.
The Big Picture
Clearly, the more affordable a home, the more competition a buyer will face. But, housing affordability in Denver remains solid and close to historic averages!