Front Range Real Estate Market Update, February 2, 2023

In some parts of the country, including San Francisco and San Jose, California, Phoenix, Las Vegas, and Seattle, home prices rose so quickly during 2021 and 2022 that homes became unaffordable. Prices rose so high that homes were out of reach for many people. The median income wasn’t high enough to purchase median-priced homes.

Home prices are falling dramatically in those markets, unlike in markets like St. Louis, Kansas City, or Chicago, where prices didn’t rise so much.

Trends in metro Denver are closer to those in San Francisco and Seattle than trends in Kansas City and Chicago.

In 11 counties surrounding Denver, the median sold price peaked in April at $625,000. Last month, the median price in these counties was $538,838, which is 13.7%, or $86,162 lower than in April.

If prices have fallen because homes weren’t affordable, how affordable are they now?

The answer is complicated, but we can compare typical monthly payments over the past few months to see whether homes are more affordable now than they’ve been.

Let’s assume a buyer makes a 15% downpayment and pays 2% in property taxes, HOA fees, and insurance. Since they’re putting 15% down, we’ll also include .375% for mortgage insurance per year.

The monthly payment for a home sold at the median price of $625,000 last April would have been $4,098.64. 

Last November, the median home price had fallen to $564,950, but interest rates were high. For example, a buyer may have gotten a rate of 7.21%. Here, the monthly payment would have been $4,354.49.

Affordability improved significantly in January, when a typical buyer may have purchased a home for the median price of $538,838, getting an interest rate of 6.09%, and had a monthly payment of $3,813.77.

Today, interest rates are at about 6.04%, and home prices are about the same as last month. As a result, homes are more affordable than they have been in many months.