Tag Archives: Denver Real Esate Market

Denver Leads as a Hottest Home Market 

Making the life-changing transition from renting to owning follows major research and decision-making. One of those choices is your home buying location – and what better city to buy a home than Denver, which was ranked the no. 1 hottest real estate market for 2016?

The top home markets across the nation were rated based on Zillow’s Home Value Index (ZHVI) Forecast, recent income growth and low unemployment rates. Denver took the top spot with 5 percent forecasted home value growth throughout the next year and a low 3.1 percent unemployment rate across the entire metro area.

The hottest submarkets include Delmar Parkway, Highline Villages and Centretech in Aurora with Ruby Hill placing high among neighborhoods in the entire metro.

Before packing your bags and relocating to Denver, future home buyers need to crunch the numbers and learn about their buying power. Developing a housing budget helps determine whether it’s best to rent or buy a home in Denver, assisted by the breakeven horizon – or the number of years it takes for buying to become cheaper than renting the same home.

Cost of buying in Denver

The median home value in Denver is $343,800, an impressive 15.3 percent rise from one year ago. If a homebuyer were to put 20 percent down on a median-priced home in Denver, or $68,760, assuming a 30-year fixed loan at a 3.508 percent interest rate, they would pay $1,647 per month. The total mortgage payment includes principal and interest ($1,236), insurance ($67) and taxes ($377).

Cost of renting in Denver

Assuming you’re looking to rent an apartment in Denver at a median value, you would pay $1,959 per month. In the wider Denver metro, renters pay a median $1,977 per month. Compared to the national median of $1,388 per month, rental rates in Denver are costlier, but keep in mind Denver is a buzzing city and U.S. medians include rates from towns across the entire country.

When does buying outpace renting?

While the example mortgage payment of $1,647 per month is lower than the median city rent rate of $1,959 per month, it is still cheaper to rent first when accounting for the down payment of $68,760. In addition, the cost of buying goes beyond monthly mortgage rates to encompass closing costs and the general fees of homeownership, like maintenance.

In Denver, the breakeven horizon as of the last quarter of 2015 was 1.7 years, a 0.09 rise from the year prior. So, if you’re planning to stay in a home longer than 1.7 years it’s more cost-effective to buy.

Overall, if you have the recommended 20 percent down payment ready, buying a home in Denver now could be a great investment opportunity. However, this is assuming you perform the proper home buyer due diligence.

Keep in mind, you typically don’t need 20 percent upfront to buy a home (depending on your lender pre-qualifications), but a heftier down payment ensures a lower interest rate. If you aren’t quite financially prepared to buy, renting below budget to save before those 1.7 years are up is your best bet in the meantime.

By Jennifer Riner, Zillow

 

Denver Real Estate Agents        Colorado Rentals 

Can Millennials Afford Homes in Denver Boulder

Can Millennials Afford Homes in Denver?

Rents are climbing in most major cities across the country, driving more folks to consider buying homes sooner than their initial plans. By purchasing a property, renters begin investing their monthly payments into the equity of their homes rather than losing that money each month.

The widely-accepted housing affordability guideline is to spend no more than 30 percent of your income. Currently, renters pay 30.1 percent of their incomes on rent each month, while homeowners pay just 15.3 percent on their mortgage payments. In Denver, those values are even costlier.

Denver renters pay 33.4 percent of their incomes and homeowners pay 19.8 percent each month. In fact, rents in Denver are up 10.6 percent in the last year.

Clearly, buying is the better financial option for monthly savings, but owning a home costs more than the monthly payment. Buyers need to prepare for the down payment, closing costs, property taxes, homeowners insurance and annual maintenance costs. Homeownership is expensive, but it’s still the American dream and many millennial-aged folks are beginning to consider the transition to avoid rising rents. But, can they afford it?

Millennials are between the ages of 23 and 34 years old and are generally some of the lower earners nationwide because of their youth. Unfortunately, incomes have not kept up with rising home values in the real estate market. Since 2000, incomes only rose 15 percent among the lowest third of U.S. workers. Meanwhile, home values appreciated 41 percent. From that perspective, low-earners would be strapped to find affordable inventory. However, the facts prove that millennials can afford much of the available inventory.

The median income of millennials in Denver is $56,843. Assuming these millennials could afford a 5 percent down payment and spend 30 percent of their monthly income toward a mortgage payment with a 3.98 interest rate, then Denver-based millennials could afford nearly half of the homes on the market. The potential price of homes they could purchase would be $313,299, freeing up 46.3 percent of the inventory. Zillow found the total number of for-sale listings at that price point going back to 2010; of all 6,577 listings in Denver, a millennial could afford to buy 3,045 of the properties.

Although affording half of the market seems reasonable for a lower-earning group, it’s well below the national affordability rate of 69.7 percent. Across the country, millennials can afford far more of the for-sale market, but their median income is lower at $49,176, and their purchase price is less too ($271,041).

Denver is a hot sellers’ market for 2015, ranked third in fact. Buyers battle for inventory and sellers can get away with steep prices because the inventory is low compared to the demand.

And the demand doesn’t seem to be calming anytime soon. According to the Zillow Housing Confidence Index survey, 19 percent of 18- to 34-year-old renters plan to buy in the next year. The survey indicates 29,000 millennial buyers will emerge in the Denver market within the year.

If renting is becoming too pricey in the Denver area and you’re considering buying instead, review the for-sale listings and keep the 30 percent guideline in mind. First-time buyers with good credit can offer 5 percent or even 3 percent down to ease the upfront costs of financing a home purchase – some loan options even allow zero down.

Start shopping now to get an idea of the inventory and value before bidding in the competitive Denver market.

This post courtesy of Tali Wee of Zillow

 

 

Denver Real Estate Agents                 Colorado Homes For Sale

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