The payment to buy a typical home in a metro area jumps 21% this year


Between higher mortgage rates and higher home prices, buyers of a typical home in the Denver metro area faced monthly payments 21% higher at the end of March than they did. was the case earlier this year, according to a new Zillow analysis.

Going back a full year, potential buyers in the Denver metro area are now paying 42.2% more, ahead of the national average increase of 38%. As significant as the increase in monthly payments in Denver is, other areas are higher. Monthly payments in Dallas, Phoenix and Atlanta have increased by around 48% over the past year, while increases in Nashville, Tennessee, Tampa, Florida and Las Vegas are over 50%.

“Higher mortgage rates were expected this year, but the speed of their rise has been mind-boggling,” Zillow senior economist Jeff Tucker said in a statement. “There will be a time when the cost of buying a home deters enough buyers to bring price growth back to Earth, but for now there is plenty of fuel in the tank as the season for home shopping starts.”

The analysis pegged a typical home value at $627,072 in the Denver metro area, up 24.3% from last year. It also assumes that a buyer has paid a 20% deposit, which becomes increasingly difficult to achieve as prices rise. Zillow lists the monthly mortgage payment in this scenario at $2,445 in metro Denver, which is much higher than the US average of $1,316.

Since mortgage rates rose again in April, the spread is widening further. If there’s a silver lining, it’s that higher costs have reduced competition and boosted supply. The inventory of homes available for sale in the Denver metro area rose 30.5% between February and March, but remains 4.6% lower than a year ago, according to Zillow.

“Eventually, mortgage rates will slow home prices, but that hasn’t happened so far,” Ken Johnson, an economist at Florida Atlantic Univesity, said in a report last month. “We shouldn’t see rapid price increases as mortgage rates rise. It’s this kind of exuberance that has led to past real estate recessions.

A valuation FAU index and Florida International University estimates home prices in the Denver metro area are 37% higher than where they should be based on historical trends, while in Colorado Springs they are nearly 45% higher.

Fear that prices will only rise should not be the main motivation for buyers, Johnson said. He argues that the current housing cycle appears to be peaking and prices are historically heading back towards the long-term trendline for those patient enough to wait.

“Perhaps staying where you are now and letting this irrational market take hold would be one of the best decisions you could ever make,” he said.

Tenants also face inflationary pressures, but not to the same degree. The Zillow Rent Index for Metro Denver is $1,905 per month, up 15.7% from a year ago. Nationally, the rent index is $1,904, up 16.8%. In this regard, Denver’s rents are more in line with national averages than its real estate payments.


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Elaine R. Knight