Housing Market in Metro Denver: A More Balanced Perspective on Value for Your Space
Metro Denver’s housing market is widely recognized as one of the most expensive in the country when considering median home prices. However, when evaluating the amount of square footage buyers can acquire for their money, the market appears to be on the pricier side but not exorbitant.
According to Zillow, metro Denver ranked eighth among the most expensive housing markets last year, coming just behind the New York City metropolitan area. However, when factoring price per square foot, which determines the value buyers receive, metro Denver dropped to the 21st spot out of the largest 100 metros, as revealed in a blog post by RealtyHop, a home search portal.
Over the years, Denver has witnessed a significant surge in home prices, with the cost rising from $293.86 per square foot in 2019 to $367.62 per square foot this year, even before the pandemic. The influx of residents from pricier markets has played a role in driving up housing costs.
Shane Lee, a data scientist with RealtyHop, stated, “Migration has inevitably driven up home prices in places like Denver. Although Denver is still more affordable compared to cities like San Francisco and LA, it has become one of the least affordable cities in the country.”
RealtyHop examined the square footage that buyers could obtain at the median U.S. home price of $375,000 across the 100 largest metro areas. For instance, in San Francisco, the most expensive large market, buyers would receive approximately 374 square feet with a median price per square foot of $961.80. On the other hand, in Detroit, that same amount of money would buy a generous 5,109 square feet of housing at a median price per square foot of $69.30.
While these figures represent extremes in both markets, they provide a basis for comparison. In Denver, buyers spending $375,000 could secure approximately 1,067 square feet. Assuming a 20% down payment at current mortgage rates, the household would need to earn $84,000 annually.
The costliest markets in terms of square footage were primarily located in coastal states, with California taking the lead. The combination of a desirable climate and limited room for expansion due to geographical constraints drives up prices in these areas.
“Major cities in coastal states tend to offer higher-paying jobs and historically experience higher home prices and a higher cost of living,” explained Lee. “As you move inland, states generally have more land and a lower population density, resulting in larger homes.”
Overall, the housing landscape in metro Denver remains pricey, but when considering the value buyers receive in terms of square footage, the market becomes relatively more reasonable compared to other locations.
Scottsdale, Arizona, took the lead as the priciest market in an inland state, with a cost of $419.23 per square foot. Denver followed closely behind. Other expensive interior cities included Reno, Nevada; Austin, Texas; and Boise, Idaho. This resulted in Texas being categorized as an inland state.
Excluding Detroit, the best deals per square foot could be found in Birmingham, Alabama; Cleveland, Ohio; Lubbock, Texas; Wichita, Kansas; Buffalo, New York; and Fort Wayne, Indiana.
The COVID-19 pandemic further expedited the trend of shifting from coastal to inland cities. Remote work opportunities and the desire for larger living spaces motivated families to seek housing in these areas. This, in turn, hindered the previous push for dense urban living and tiny homes.
One concern for popular cities like Denver revolves around the potential relocation of individuals due to high home prices and rents. Recent migration figures suggest that this may already be occurring. Lee and other experts believe that the significant price gap RealtyHop discovered will gradually decrease in the future.
“As time progresses, we should witness a narrower price difference between coastal cities and inland cities, as more people are priced out of the costlier markets,” predicted Lee.