Denver’s hot real estate market is tough all over. Whether you are buying or renting, competition for housing is stiff with no signs of it getting any easier. Booming job growth and low unemployment has put Denver in the national spotlight as one of the top places to live. The heavy population growth has kept housing costs on the rise.
Rental Rates Up
While we typically talk about the real estate market and purchasing homes, the rental market has been on fire for the last few years as well. Denver area rental rates are up an average of 3% over the last 12 months, according to a September market report from Apartment List (www.apartmentlist.com).
Big jumps over the past twelve months for a 2-Bedroom apartment include increases in Aurora at 5.7%, Arvada at 5.0% and Lone Tree at 7.6%. The average cost for an apartment in Lone Tree is $2,030, which is the highest in the Denver metro area.
Nationally, the average increase was 2.8%, with a median rental rate of $1,160. Compare that to Denver’s median rate at $1,340. Other cities like Phoenix have seen growth but are more affordable with a 2-bedroon median rental rate of $1,030, while areas like Washington DC saw an overall decrease of 0.8%.
To Buy or Rent
Although condominium and townhome prices have risen an average of 10% over the last year, it is not unusual for the purchase of a property to be a better financial deal than renting. With the obvious advantages of building equity aside, record low interest rates and rising rental costs often leave the condo payments lower than the monthly rent on an apartment. Add in the additional mortgage interest tax incentives, and it’s a clear choice.
The problem with purchasing has been the hot market and having the ability, or sometimes sheer luck, in getting a property under contract. But finding a rental can be just as difficult. The booming population has overwhelmed the rental market. Some home buyers are finding themselves pushed out of the housing market, it’s the same with renters experiencing the same issue.
What About All of that Building?
New construction is spread across the entire metro area, including large apartment complexes. Current demand has new communities full as soon as they open. Growth in Denver continues to outpace the ability for new housing of any type to keep up. Supply and demand will eventually meet, and the markets will level, but that isn’t happening any time soon.
The Seasonal Slow Down
As we dive into fall, the seasonal slow-down has begun. There are fewer homes for sale, and fewer transactions, but the competition to buy remains high. The tapering off will continue through December, bottoming out in January. Real estate is very cyclical, this pattern is repeated over and over. The last three years are cookie-cutter images of the prior year.
The rental market is seeing a similar slowdown, but industry experts expect the market to pick back up in the spring. For both rentals and purchases, forecasts for Denver in 2018 are positive. Barring a major national or world crisis, next year should bring more competition and higher costs across the board.