Home price gains topping 20% push Denver up four spots to eighth least affordable
Home prices are rising so fast along the Front Range that Denver and Colorado Springs ranked among the 10 most unaffordable housing markets in the country last month, according to an affordability survey from OJO Labs, a real estate tech company based in Austin.
Metro Denver moved up four spots to eighth least affordable, while Colorado Springs rose one spot to 10th in February’s ranking, which looks at the ratio of the median home sold price to median household incomes. Denver had an unaffordability ratio of 5.67, based on a median home sold price, including condos, of $540,000, which ranked fourth-highest, and now ahead of New York City and Boston.
Colorado Springs, which has absorbed some of the unmet demand in metro Denver in recent years, had a median home sold price of $440,000, which was 5.62 times median household income. Its median home price is tied with Miami-Fort Lauderdale for the 11th most expensive.
Marcio Jose Sanchez, The Associated Press
San Diego has displaced San Francisco, pictured here, as the least affordable housing marketing in the country. But Denver in February ranked eighth worst and Colorado Springs 10th on an affordability list that looks at median prices versus household incomes.
“This is the first time since we’ve started tracking affordability that Denver has seen a year-over-year median home price increase of more than 20%, which is likely what led to the big jump in its unaffordability ranking this month,” said Patrick Kearns, director of storytelling at OJO Labs. “It’s the highest Denver has appeared on our list.”
Denver did break into the 10th spot in November but slipped out in December and January. Prices rose 21.3% in February year-over-year, resulting in a sharp rise in the rankings. A separate report from the Denver Metro Association of Realtors earlier last week recorded a 6.5% monthly surge in February in the median sold price of homes and condos.
“I can’t say it’s an anomaly, but we don’t see jumps like this of the larger, pricier markets very often, because it means Denver is moving past other hot markets like Seattle and Boston,” Kearns said. “Usually most of the movement is in lower-priced markets that are clustered pretty closely.”
California had four of the 10 least affordable housing markets, led by San Diego with an unaffordability ratio of 8.27, based on a median home sold price of $777,000. Until January, San Francisco-Oakland had consistently held the top spot for unaffordability. It is a much more expensive market, with a median sold price of $1.03 million. But a strong tech economy also supports higher paychecks, and home price gains have been anemic, putting the unaffordability ratio at 7.97. Los Angeles is the third least affordable market and Sacramento-Stockton is the seventh least affordable.
Other non-California markets with higher unaffordability ratios than Denver include Miami; Mobile, Ala.; and Las Vegas. Five of the metro areas surveyed still had median prices below $200,000 and affordability ratios below 3. They include Pittsburgh, Detroit, Cleveland, Buffalo, and Green Bay, which is the nation’s most affordable large metro area.
Although some financial advisers don’t recommend buying a home that costs more than three times household income, lenders will go as high as 4.5 times to 5 times depending on where interest rates are at. They were at historic lows during the pandemic, but have risen in recent months.
A lack of supply is driving strong home price appreciation and contributing to unaffordability. Colorado as a state had the fifth most competitive housing market in the country in February, with 58.4% of homes selling above the initial list price, compared to only 47.2% in January, Kearns said.
“With historically low inventory, it looks like more bidding wars and more offers above list price are really driving up home prices,” he said.
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