Ah, Denver. There’s no place quite like it in the country, and if you’re looking to buy a home here, congratulations! But before you get too excited, we need to have a little talk and set some expectations.
There’s no real easy way to put this, but the Denver market can be a bit tough for buyers. The low amount of inventory, combined with the huge influx of people moving here, has caused a bit of a lopsided situation in our city’s supply and demand.
As a result, there is a high amount of competition among buyers, bidding wars are an everyday occurrence, and homes are going under contract mere days after hitting the market.
But it’s not all bad, of course! Buying a home is still one of the smartest investments you can make, and working with an experienced Realtor will make the process an enjoyable one!
Now that we’ve had the chance to set some expectations, let’s take a look into some things you should consider when budgeting for a home here in Denver.
Location, Location, Location.
That’s the tried and true method of home valuation. Here in Denver, location really is everything. Prices vary quite a bit depending on the neighborhood you choose. If you don’t really know which neighborhood is right for you based on your personality and interests, consider making a list of what’s most important to you. Do you want to live close to parks? Do you love live music? How about restaurants and bars? Seriously, go write down your top 3 or 4 “must-haves”. I’ll still be here when you get back.
All done? Welcome back.
Let’s face it, many neighborhoods are simply “hotter” than others. In other words, certain neighborhoods have become the trendy place to live, and you’ll find prices are quite a bit higher in those areas. Check out the Highland area (also known as “The Highlands” or the “Northside”) to see a good example. Over the past decade or so, this whole area was the hotspot for house-flippers who breathed new life into some great old homes. Of course, there are plenty of new builds that may not necessarily fit in with the historical neighborhood architecture, but to each their own. If you want to live in this hip ‘hood, it’ll set you back somewhere around the $500k range on average for an entry-level home. There are many more expensive homes as well.
Perhaps you don’t have half a million bucks laying around, and you’d rather live in a more “up-and-coming” neighborhood where you’ll build some equity as time goes on. For an example, check out Harvey Park. Although it already is a great neighborhood, others are starting to catch on to the charm and it’s becoming more popular among buyers each year. You can expect to find some great homes starting around the $300k range and going up from there. Flippers have started snatching up homes around here too, but it is still possible to get a “deal” if you’re willing to do some handywork and have the money to compete with cash buyers.
Keep in mind almost every neighborhood across the Denver area has its own style and personality, so it’s important to first decide on a few different neighborhoods that match what’s personally important to you.
When it comes to real estate, it’s safe to say a house with large square footage, more beds/baths, and a bigger yard will cost you more than a home with less (assuming everything else is the same, including location). It’s not rocket science.
So again, when budgeting for a new home, choose a few neighborhoods that match what’s important to you, and then decide on what you need in terms of size.
If you have a limited budget, you may have to compromise a bit and find a smaller home in the higher priced neighborhoods. If you’re the Monopoly guy and money isn’t an issue, then you probably don’t have to worry about that.
‘Tis the season.
If you’re new to the home buying scene, you may not know the time of year has an impact on home prices. Since the Denver market has been nuts the past few years, this hasn’t been as much of a factor lately. But in a more balanced market, it definitely needs to be taken into consideration.
In the spring and summer months, homes typically sell faster than tickets to the Great American Beer Festival. Things then usually cool down a bit in the fall and winter months. Much of this is because families buy and sell homes while their children are out of school. On the other hand, many people simply just don’t want to worry about packing and moving when it’s cold out. This increases competition/demand among buyers, which increases the prices. Never thought you’d have to revisit the ol’ law of supply and demand you learned back in macroeconomics class, did you? #adulting
Denver as a whole.
Haven’t quite decided which neighborhood is right for you? No worries. Let’s look at the Denver market as a whole. That should give you a better idea of how things currently stand, and where they are headed in the near future.
The numbers are constantly changing, but in 2015 the average price of a home in Denver as a whole was right above the $360,000 mark. Most industry experts predict that number will rise quite a bit more throughout 2016, which is either awesome or terrible depending on what side of the buying/selling fence you’re on. Of course, anything can happen in real estate.
Where do you go from here?
Once you have identified the Denver neighborhood(s) you like best, continue your research. Read up on the great things the neighborhood has to offer in terms of restaurants, bars, shopping, nightlife, parks, schools, etc. Take a visit if possible. If you’re a local, walk or drive through the neighborhood, talk to other locals, and ask questions. If you live out of state, take a long weekend and explore Denver. Book an Airbnb in the neighborhood of your choice to get a glimpse into what its really like to live there.
You’re also going to want to make sure you have enough money saved for a down payment. That amount depends on a number of factors such as the cost of the home and your credit score. In order to be competitive in this market, your best bet is to have at least 20% of the purchase price as your down payment. To put it in terms of simple numbers, buying a $100k home means you ideally want to shoot for a $20k down payment to set yourself apart from the majority of other buyers. Sure, that’s a lot of money to come up with, especially considering the average Denver home values mentioned above. Thankfully there are all kinds of loan programs you can use that do not require 20% down, so consider discussing your options with a qualified lender.
Once you have a good idea of what you want and the amount of cash to throw down, get in touch with me. I’m more than happy to help you navigate through the Denver home buying process and find that perfect home.
Good luck. Living in Denver is awesome.