Denver, CO Real Estate Market Trends & Analysis [Updated 2020]

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The Denver real estate market appears on track to pace the national market over the course of 2020. If for nothing else, real estate in Denver has outperformed most markets across the country for the better part of a decade, and the Mile-High City appears to be less susceptible to volatile shifts in the market brought about by the Coronavirus. The city was already receiving support from a number of positive indicators prior to the issuance of “shelter-in-place” orders, and the positive momentum should carry over to the post-pandemic marketplace. The city’s unemployment rate, in particular, fared better than most markets over the turbulent second quarter, which should facilitate more housing activity sooner rather than later.

All things considered, the Denver real estate market is positioned to return to normal faster than many of its counterparts, which begs the question: Is Denver a good real estate investment? While the answer is ultimately up to the investor, this city is currently brimming with potential for those who know where to look. The Denver real estate investing community should be able to capitalize on today’s market.

Denver Real Estate Market 2020 Overview

  • Median Home Value: $465,466

  • 1-Year Appreciation Rate: +1.7%

  • Median Home Value (1-Year Forecast): -1.7%

  • Median Rent Price: $2,150

  • Price-To-Rent Ratio: 18.04

  • Denver-Aurora-Broomfield Unemployment Rate: 12.1% (latest estimate by the Bureau Of Labor Statistics)

  • Denver County Population: 727,211 (latest estimate by the U.S. Census Bureau)

  • Denver County Median Household Income: $63,793 (latest estimate by the U.S. Census Bureau)

  • Percentage Of Vacant Homes: 9.64%

  • Foreclosure Rate: 1 in every 8,047 (1.2%)

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2020 Denver Real Estate Investing

The Mile-High City has been at the forefront of the national recovery since 2012, which has many people asking the same question: Is it a good time to buy a house in Denver? The answer is inherently tied to each investor and their particular situation, but the fact remains: today may be a great time for real estate entrepreneurs to consider building a long-term, passive-income portfolio. Otherwise known as a buy-and-hold exit strategy, becoming a rental property owner is perhaps more attractive today than in recent history. In particular, the following indicators are tilting the scales heavily in favor of passive income investors:

  • Interest rates on traditional loans are historically low

  • Years of cash flow can easily justify today’s higher acquisition costs

  • The price-to-rent ratio suggests high home prices will increase rental demand

For years, rehabbing was the most common investment strategy used by Denver real estate investors. However, the market has shifted, and home prices suggest a longer investment horizon is more viable.

Long-term investors are awarded the ability to navigate today’s higher prices with lower interest rates. As of April, the average rate on a 30-year fixed-rate loan was 3.31%, according to Freddie Mac. April marked the lowest average mortgage rate for an entire month ever, and the Fed just announced it will keep interest rates low for the foreseeable future. As a result, the cost basis for real estate in Denver is lower, making homes more affordable in lieu of higher prices. Investors who take advantage of today’s mortgage rates could easily detract thousands of dollars from the overall cost of their purchase.

In addition to lower borrowing costs, investors intent on building a rental property portfolio can justify today’s higher prices with cash flow. Whereas rehabbers and flippers need to acquire homes below market value to pad profit margins, rental property investors can stand to acquire homes at today’s high prices with the intentions of paying their mortgages down with other people’s money each month. The cash flow can help offset the higher acquisition costs in as little as a few years, all while building equity in a physical asset.

Denver real estate investors should take solace in the city’s 18.04 price-to-rent ratio, as it is currently much more affordable to rent than own. As a result, vacancies will be easier to avoid. Not only that, but listings are harder to come by in today’s market, too. The unique combination of affordability and a lack of listings suggest rental property owners will see plenty of demand for the foreseeable future, at least until more homes are constructed.

The real estate investing community is lucky to have a number of viable exit strategies at its disposal, but none appear more attractive than building a proper rental property portfolio at the moment. Too many important market indicators are pointing towards becoming a buy-and-hold investor to ignore.

2020 Foreclosure Statistics In Denver

The Denver real estate market hasn’t completely avoided the downturn created by COVID-19, but it has done relatively well compared to other cities around the country. Namely, the unemployment rate hasn’t increased as much as the national unemployment rate. As recently as February, the unemployment rate in Denver was 2.8%. Following the spread of the Coronavirus, unemployment shot up to 12.1% in April. The United States unemployment rate, on the other hand, increased from 3.5% to 14.7% over the same period of time. All things considered, the city seems to have remained slightly more insulated, which appears to have helped its real estate market.

Prior to the pandemic, however, Denver was even better off than its national counterpart, which led to a relatively low foreclosure rate. Today, only one in every 8,407 Denver homes is distressed (default, auction or bank owned). At that level, the foreclosure rate is a very healthy 1.2%. It is worth noting, however, that today’s foreclosure rate is the result of years of economic growth. As recently as May, “the number of properties that received a foreclosure filing in Denver, CO was 68% lower than the previous month and 90% lower than the same time last year,” according to RealtyTrac.

Of the city’s distressed inventory, the overwhelming majority consists of auction homes. While down 71.2% year-over-year, auction homes make up 86.4% of the city’s foreclosures. The remaining foreclosures are bank owned, which simply means they failed to sell at auction. Nonetheless, the Denver real estate investing community would be wise to visit auctions in an attempt to procure deals at a discount. At the very least, heading to the source with the most foreclosed homes should increase one’s odds of landing a deal below market value.

It is worth noting, however, that while foreclosures have been on the decline, the presence of the Coronavirus is expected to cause a spike in the future. The unexpected economic downturn will most likely inhibit homeowners from complying with monthly mortgage obligations. It is safe to assume more homeowners will be distressed later in 2020 than now. While forbearance programs are expected to keep people in their homes for the foreseeable future, homeowners will be expected to become current on their mortgages sooner or later. When that time comes, those who can’t comply may find themselves distressed, and well-positioned investors may be able to offer a helping hand.

2020 Median Home Prices In Denver

The median home value in Denver is a healthy $465,466. Nonetheless, today’s home value doesn’t tell the whole story. No more than a decade ago (June 2011), the median home value in the Denver real estate market dropped as low as $232,000. Thanks largely to an expanding economy, increasing sentiment and—ironically—a lack of available inventory, real estate in Denver has ridden a wave of positive indicators to get to where it is today, to the tune of a 100.6% increase over the course of nine years. To put things into perspective, the median home value in the United States increased 52.6% over the same period of time, and is now approximately $248,857, according to Zillow.

It is important to note that home values appreciated so much over the last decade that increases actually started to temper about a year ago (the beginning of 2019). That’s not an indictment on the local market, but rather a good sign for those living in the area. Prices had gotten exorbitantly expensive, so the temperance was actually long overdue. Since then, prices have only increased about 1.7% in the last year, a dramatic drop from the previous year.

Moving forward, the presence of the coronavirus is expected to drop prices even further, but only temporarily. In fact, experts predict prices will drop a modest 1.7% (only wiping out the last 12 months of increases) over the next 12 months. That means prices will remain high, and perhaps even return to previous highs as soon as this time next year. If for nothing else, the same inventory shortage that served to increase prices for the better part of a decade may be magnified by home builders sitting on the sidelines during the pandemic. Without new builds being brought to the market, it’s safe to assume competition will remain high, driving prices up even higher than they are now.

Denver Real Estate Market: 2018 Summary

According to Denver real estate news, the Mile-High City not only did well for itself in 2018, but it also thrived. Most notably, the city became the beneficiary of significant appreciation. In the six year leading up to 2018, the median home value increased somewhere in the neighborhood of 90.0%, according to the experts at Zillow. There’s no doubt about it: the Denver real estate market was in a much better place today than it was even just a few short years prior. At the same time, opportunity knocked for savvy investors looking to capitalize on the fast paced market in the Rocky Mountains. Those who took advantage of the opportunity are most likely still seeing the benefits today.

Denver Real Estate Investing 2018

According to Zillow’s Home Value Index, the median home value reached $407,100. To get to that point, median home values increased by as much as 8.9% over the previous year. It is worth noting, however, that values have risen all the way to today. Anyone who purchased in 2018 thinking most of the city’s appreciation had already taken place was pleasantly surprised, especially if they acquired a distressed home at a discount.

At one point, Denver had somewhere in the neighborhood of 594 homes that were either in foreclosure or at risk of it. More specifically, those homes were either in pre-foreclosure, up for auction, or were already repossessed by the original lender.

According to RealtyTrac, “the median sales price of a foreclosure home was $277,950, or 14% lower than non-distressed home sales.” To put the potential for savings into perspective, savvy real estate investors could save an average of nearly $47,000 if they choose to buy a distressed property.”

Denver Real Estate Market: 2016 Summary

  • Median Home Price: $369,000

  • 1-Year Appreciation Rate: 9.1%

  • 3-Year Appreciation Rate: 41.3%

  • Unemployment Rate: 3.3%

  • 1-Year Job Growth Rate: 3.1%

  • Population: 2,767,737

  • Median Household Income: $64,439

Denver Real Estate Investing 2016

Life was good in the Denver real estate market in 2016. As one of the most stable markets in the United States, Denver was firing on all cylinders in 2016, with appreciation rates skyrocketing, employment rates improving, and new housing construction booming in every new quarter. In 2016, the median home price for the Mile-High City was about $369,000, compared to the national average of $215,767, and $30,000 more than the same period in 2015. All signs pointed to a bright future, and nothing has changed since then.

The first quarter of 2016 was very rewarding for investors and homeowners. Along with blossoming appreciation rates, the Denver real estate market continued to make headlines as one of the hottest housing markets in 2016, with ranking the rising city as one of the best housing markets in their annual market performance list. If that wasn’t enough, the National Association of Realtors identified Denver as one of the top 10 purchase markets for millennial homebuyers at the time.

Along with impressive appreciation rates, the unemployment rate during the first quarter of 2016 was 3.3%, compared to the national average of 5.0%. However, the cherry on top was the 3.1% increase in the one-year job growth rate, which was 1.1% higher than the national average, showcasing an improving economy.

For the first quarter of 2016, homeowners paid approximately 13.9% of their income to their mortgage payment. This is not only less than the national average (14.5%), but a slight decrease from their historical average of 14.2%. Despite investments growing, home affordability in the Mile-High City was pronounced.

Denver Real Estate Market Summary

The Denver real estate market was at the forefront of the national recovery over the last decade, and the Mile-High City appears poised to continue leading the pack. Most notably, real estate in Denver is propped up by a strong economy; one that didn’t see its unemployment rate increase as much as the national average. For whatever reason, Denver appears to be slightly insulated from the pandemic, which bodes well for the city moving forward. In fact, look for the Denver housing market to be one of the first to come out of the “shelter-in-place” orders with steady momentum.

*The information contained herein was pulled from third party sites. Although this information was found from sources believed to be reliable, FortuneBuilders Inc. makes no representations, warranties, or guarantees, either express or implied, as to whether the information presented is accurate, reliable, or current. Any reliance on this information is at your own risk. All information presented should be independently verified. FortuneBuilders Inc. assumes no liability for any damages whatsoever, including any direct, indirect, punitive, exemplary, incidental, special, or consequential damages arising out of or in any way connected with your use of the information presented.
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