Buyers of a median-priced home in metro Denver need to make about $17,000 more than the U.S. average
A buyer of a median-priced home in metro Denver needs to make a salary of $68,436 a year to qualify for a mortgage and cover basic expenses such as property taxes and insurance, according to a report from HSH.com.
That’s assuming a 20 percent down payment on a 30-year mortgage with an interest rate of 4.05 percent. For buyers who put down only 10 percent, the required income jumps to $80,712, says HSH.com, a mortgage research firm based in New Jersey.
The median home price in metro Denver in the fourth quarter, based on numbers from the National Association of Realtors, was $353,500, up 12.3 percent from the same quarter a year earlier.
The median is the point where half the homes cost more and half less. A household buying at the median price in Denver needs to bring home $17,322 more in income than would be required for the U.S. median home price of $222,700.
Denver ranked as the eighth most expensive market in which to buy a home in the fourth quarter, out of the 28 major metros that HSH.com tracked. Denver was the priciest market not on a coast.
Lenders, in today’s tighter lending climate, typically won’t finance a loan where payments exceed 28 percent of income. While lower down payments are available, they add a mortgage insurance payment.
On the surface, Denver households, especially those with two wage-earners, are still ahead of what HSH.com says is needed to buy a home at the median price.
Metro Denver’s median household income at the end of 2014 was $69,205, according to the Metro Denver Economic Development Corp.
In the HSH.com survey, the cities with the highest incomes needed to afford a median-priced house were San Francisco at $147,996 and San Diego at $103,164.
A hurdle for many buyers isn’t necessarily income, but the down payment. At 20 percent down, a Denver buyer would need $70,700 in accumulated equity or other savings to buy a median-priced home, an especially tough nut to crack for young households starting out.
A national survey from GoBankRates last year of 5,000 households found that about half had zero savings, and only 19 percent had managed to set aside more than $5,000.
While those numbers aren’t Denver specific, a separate survey from WalletHub last year ranked the city 70th out of 150 for the ability of residents to save.
For renters who can clear the income and savings hurdles, buying can pay off in about 20 months on average in Denver, according to real estate website Zillow.
HSH.com puts the mortgage and related costs on the purchase of a median-priced home in metro Denver at $1596.85 a month, while the Zillow Rent Index, which skews toward rental homes, is at $1,952 for Denver.
Apartments, however, still have a lower out-of-pocket cost, with median rents in metro Denver at $1,252 a month during the fourth quarter, according to the Apartment Association of Metro Denver.