Denver Housing Costs – The Problem
Very simply put it is easy economics: Denver housing costs are determined by the large amount of demand with the small amount of supply. As I mentioned in a previous post the average sale price for homes in Denver is around $400,000. The impact this is having is to drive many buyers out and away from the Mile High City.
When these buyers look at new homes a big deciding factor is proximity to parks and playgrounds, schools and workplaces.
Denver Housing Costs – The Temporary Answer
Since supply is down and housing costs within the Denver Metro Area climbing home buyers are getting creative. Many are purchasing homes in towns to the Northeast of Denver where some builders are breaking ground on starter houses.
Other buyers are purchasing land, working with an architect and building their own new home.
In either case, for the same price or less you can get a home that is 3-4 times the size of a house in the Denver Metro Area.
But, unless you are serious about either option right now, these are also going to become problematic if the Denver housing costs continue to trend the way they have been.
Denver Housing Costs – The Near Future
When it comes to existing homes, only about 6-7% of them are at $300,000 or less. So if you are looking in that price range you’ll need to be prepared to act quickly. Get pre-qualified for a loan and have cash on-hand. Also prepare yourself for a bidding war which could push the sales price above the asking price.
New homes are currently better, but look like they might be affected as well. Land, labor and material costs are rising. Also, businesses in the Denver area are hiring employees from out of state. This is driving new home building prices up. Many of these people are coming from California and the East Coast. Homes that cost a $750 thousand or more are normal. So a $400,000 construction cost is very acceptable to them.
Denver Housing Costs – What to do?
I’m interested in your opinions and experiences.
The cost of a “starter home” has increased from $200,000-250,000 to on average $400,000. It’s pushing people out of the market. The problem is renting isn’t any better
So one way is to increase the supply significantly but smartly. This should have an effect on labor and material costs, and potentially provide more jobs for suppliers and sub-contractors.
Please let me know what your thoughts are. Solutions?