Denver’s Housing Affordability Index Reached a Record Low in April

By Robert Davis

Photo: Scott Webb/Unsplash

Housing affordability in the seven-county Denver metropolitan area reached a record low in April, according to the latest market statistics from the Colorado Association of Realtors (CAR).

CAR’s Housing Affordability Index — which measures the buying power of a median income worker in a particular market — dropped by 10% last month to 46 points, the lowest figure the trade group has measured in the Denver area since 2010. For comparison, a market is considered affordable if its HAI measures 100 points.  

The monthly data also shows that rising interest rates and inventory levels have done little to quell the appetite for homebuying in the Mile High City. Overall, the average sales price for Denver real estate came in just below $794,000 in April, representing a climb of 16.1% year-over-year. Even so, more than 4,400 properties exchanged hands last month, which represents a slight decline from April 2021.

“With demand filling in any type of underground tunnel you’d hit on the other side of Green Mountain, we don’t have any indicators that prices will decline or regress in the foreseeable future,” Matthew Leprino, a Denver-area realtor, said in a statement. “They may, and we can hope, simply reach level ground and hang around for just a moment — until we refuel the tank.”

Denver’s real estate market has been red-hot since the pandemic began. According to data from Zillow, home values in Denver have swelled by more than 31% over the last two years, with more than 20% of that growth occurring over the last 12 months.

These rapidly appreciating home values have also put upward pressure on local rents, which has increased the risk of low-income households being forced into homelessness. The average rent in the city increased to $1,765 during the first quarter of the year, according to the latest Denver Metro Area Apartment Vacancy and Rent Survey from Denver University’s Daniels College of Business. That total represents a 14% increase from last year.

Meanwhile, the city’s vacancy rate — which measures the percentage of all units available for rent in a particular area — stood at 4.3%, representing a nearly 22% decline year-over-year. Denver’s rental vacancy rate in the first quarter was also 1.5 percentage points below the national average of 5.8%, according to the Federal Reserve Bank of St. Louis.

Homebuyers and renters across the state are feeling the squeeze as well. The statewide affordability index currently stands at 51 points, meaning that a median-wage worker needs to supplement their income by approximately 49% to afford a median priced home. At the end of April, Colorado’s median home value stood at $600,000, according to CAR.

Even relatively affordable markets like Colorado Springs are beginning to see shifts in consumer activity. Colorado Springs saw its new listings grow by nearly 10% year-over-year in April but the median home price grew to more than $489,000, a 15% increase from April 2021, according to Pueblo-area realtor Patrick Muldoon.

“If we are lucky enough to see more listings and less buyer demand, we may just have a balance here we have not seen in years,” Muldoon said.