The median cost of a home in the Denver Metro Area has increased from $350,000 in mid 2017 to over $550,000 in 2023. Housing has certainly become more expensive in Denver the last few years!
There are two major factors affecting the cost of housing in the Denver metro vicinity. The first factor is low inventory. For quite some time now Denver’s housing inventory has been at or near historic lows. As I write this in March 2023, inventory in the Denver Metro MLS has increased from the incredibly low levels of 2021 and 2022. But inventory is still low compared to historical averages. As a result, nice homes in good neighborhoods are still selling pretty quickly.
The second major factor is higher interest rates. Interest rates have doubled from the historic lows of 2021 and early 2022, substantially increasing the monthly cost of a mortgage. This has priced many buyers out of the market, or forced them to buy lower priced homes. Of course, cash buyers are not affected by interest rates, and the percentage of homes purchased with cash has risen recently. Despite higher prices and interest rates, it’s still a seller’s market.
What’s the Denver Metro Housing Affordability Outlook?
Over time supply and demand will come closer to being in balance. But most experts expect it will take quite some time. Nationwide about a million more new households are being formed every year than new housing is being built. That’s a recipe for increased demand, a shortage of inventory and higher prices.
On the other hand, higher interest rates are reducing demand. Denver area new home builders have some excess inventory and many are offering incentives for buyers.