Denver is one of the country’s least affordable housing markets

Photo: Unsplash/Sigmund

By Robert Davis

The rapid home price appreciation the Denver metropolitan area has seen over the last 12 months makes it one of the least affordable markets in the country, according to new data from the Colorado Association of Realtors (CAR). 

In February, Denver’s affordability index for single-unit homes fell to a yearly low of 59 points, meaning that the average worker in the metro area needs to supplement their income by approximately 40% to afford an average-priced home. The city’s affordability index was measured at 74 points last February, which means it has dropped by more than 20% over the last year. 

To make matters worse, the average home price in Denver keeps climbing, with no signs of slowing down. Denver’s average sales price climbed more than 11% in February up to more than $810,000, CAR data shows. 

At the same time, inventory levels keep dropping. Denver had just over 1,000 total homes for sale in February, marking a greater-than 10% decline from this time last year. 

“The fact is, there are simply no adjectives left to describe what’s happening and so, at the risk of sounding redundant and on the high-end of the cliche spectrum, I offer to you this descriptor; record-setting,” Matthew Leprino, a Denver-area Realtor, said in a statement. 

Oftentimes, the dislocation between local wages and home prices is a driving factor of homelessness. Not only can rising property prices cause homelessness by pricing people out of markets, but it can also hinder a person’s escape from homelessness as finding affordable housing becomes harder. According to the National Coalition for the Homeless, between 40 and 60% of people experiencing homelessness in a given area have jobs but still can’t afford rent. 

The National Low Income Housing Coalition (NLIHC) estimates that the average worker in Colorado needs to make approximately $27.50 per hour to not spend more than 30% of their wages on housing. That makes Colorado the ninth most expensive state to live in. 

Zip code-level data shows that there are several areas of Denver that are even more unaffordable than the statewide average. For example, people living in River North need to make more than $29 per hour to afford housing, and people living downtown need to make approximately $50 per hour. 

Even neighborhoods on the west side of town, such as Sun Valley, Harvey Park, and Barnum that are considered affordable areas, all require individuals to make more than $27 per hour, NLIHC data shows. 

Denver’s housing affordability struggles are also increasing competition for more affordable build types like condos and townhomes. The average sales price for a townhome or condo increased by nearly 6% in February up to more than $523,000. Meanwhile, just 520 units were listed last month, marking a year-over-year decline of more than 7%. 

In response, the average list-to-sale price ratio for townhomes and condos climbed to 103% last month. This means that the average buyer is paying at least 3% over list price to purchase these homes. For comparison, single-unit homes have an even higher ratio at 106%, CAR data shows. 

Leprino said these stats illustrate a pernicious situation that many homebuyers find themselves in right now – either continue to throw cash at a home in hopes of winning a bidding war or wait for a more favorable market that may never come. 

“When you have gigantic increases in price in one sector, you’d have to assume that the people who can no longer afford that realm would be moving down their order of priority list in what they want their next home to be - turns out, not so,” Leprino said.