A city booming with employment prospects and rising real estate values should be something a city should celebrate, and others should envy. For Denver residents, specifically soon-to-be or existing homeowners, the rewards of this significant growth may be overshadowed by the risks.
Real estate experts use terms like “remarkable” to describe Denver’s transformation from a city with affordable homes to one with high-priced dwellings. Rising home values is usually good news. However, many houses are priced to unaffordable levels for many residents of the Mile-High City.
The current median home price alone is five times the median income for a household. That disparity is not stopping prospective Denver homeowners from gambling with debt to income ratios.
While mortgage rates have dropped nationwide, the debt-to-income burden is smaller in almost every major city in the country. Denver is the exception. Mortgage payments are returning to pre-2008 housing bubble levels.
Many point to the growing number of employers in Denver. While it is a “problem” every city would love to have, the more people who choose to relocate causes the number of available homes to dwindle. A lack of supply drives up prices. A seller benefits while a buyer faces the possibility of taking on a higher financial burden than originally planned just to put a roof over their head.
A mortgage payment that accounts for 30 percent of a family’s income resides in the “burdensome” category. Many Denver residents living in median-priced homes are at 31 percent, an alarming number that currently shows no sign of going down. The risks may go beyond what individual homeowners will pay, impacting the overall housing market.
Some suggest that when it comes to the square footage of a home, perhaps bigger is not better. As prices rise, the size of homes has skyrocketed as well. The 1950s saw dwellings averaging just shy of 1,000 square feet. Today’s homeowners demand three times that size. A return to smaller homes on less acreage would address both the supply and cost problems.
Whether prospective homeowners are building or purchasing an established dwelling, an experienced real estate attorney can help to facilitate the process, provide insight into the risks, and ensure a successful transaction.