We’ve all felt it for a while now: that increased pressure when it comes to the cost of living here in Colorado. With rising home prices and increased interest rates, buying a home has stretched further out of reach for many. And the increase in rental rates hasn’t alleviated that burden much either. Studies currently show that buyers and renters are struggling with affordability issues when it comes to housing, with many indicating they’re cost burdened, or pay more than 30% of their income towards housing. But just how much do Coloradans have to make to afford a home in Denver these days? According to reports, a lot more than many other metros across the country.
A Rise in Costs
According to data, the average home price in Denver increased 2.7% in the last year, while interest rates currently sit at the highest level since late November 2023 according to Freddie Mac (7.22% for a 30-year loan). Paired with the average home value of about $561,000 according to Zillow, buyers would have to make over $160,000/year to qualify, assuming they also paid 20% down.
How Much Is Needed To Afford a Home in Denver
Unfortunately, while most Coloradans earn higher than the national average, many still fall short of the needed salary to make the current housing market affordable. The median income currently for Denver households stands at a little over $98,000/year, falling short of the $160,000+ needed to afford the average home price. This creates a substantial affordability gap in the Mile High City. In fact, according to a study from Clever Real Estate, Denver had the 8th largest income-to-median-priced-home price gap across the nation. This highlights the affordability crisis.
Compared to over a decade ago, things have only gotten harder with affordability. Back in 2011, buyers had to work on average 44 hours per week to earn enough to afford a home. As of last year, that average has increased 118%, meaning buyers had to average 96 hours/week to bridge that gap.
And when it comes to renting, those long hours aren’t fairing much better. Colorado renters had to average about 45 hours/week to afford rent back in 2011. Now, that average stands at 87 hours, resulting in Colorado renters working more hours to pay the rent than renters in any other state according to CSI’s Colorado Housing Competitiveness Index.
Renting Remains the Affordable Option For Now
Currently, the typical monthly payment for buyers of median-priced homes averages at just over $3,600/month. This includes insurance, taxes, and mortgage payments. By comparison, the average rent in Denver according to Zillow stands around $2,027, which pulls in a combination of apartment, condo, and single-family home rentals. However, with the rise in economic costs and lack of pace for income growth, many renters still pay more than 30% of their monthly income towards rent.
Housing is a need that isn’t ever going away and Colorado continues to be a hot spot for many looking to make a move. The choice to buy or rent a home comes with a lot of considerations, including financial, lifestyle, and personal preference. And while affordability continues to apply pressure in many aspects of our lives, we will continue to be a resource to both renters and property owners alike. Contact us about our available rentals and our property management services for more information.
