The Denver housing market appeared to be trailing with the national real estate market throughout 2020. This market was uniquely less vulnerable to the volatile changes in the residential housing market due to the COVID-19 pandemic.
The Mile-High City was already getting support from several positive indicators even before the issuance of stay-at-home directives. This support nurtured a positive momentum necessary for reaching a post-pandemic stage in the marketplace.
Last year’s second quarter was highly turbulent, but unemployment rates throughout Denver fared much better than in most similar American cities. This unique ability for markets to remain stable contributed to the spike in housing activities experienced during the pandemic.
Despite its general position to regain normalcy faster, many are still unsure if investing in the Denver housing market is a wise move. While this decision is ultimately up to you, Denver is currently offering excellent investment potential, but only if you know where to search.
To give you a sneak peek of how you can capitalize on the current market, we first have to look at how the market closed the previous year.
The 2020 Denver housing market overview
According to the latest estimates from the U.S. Census Bureau, Denver had a population of 727,211. The Bureau of Labor Statistics further highlights that this region suffered a 12.1% unemployment rate during the pandemic, consequently increasing the number of vacant homes and foreclosure rates.
Denver’s average foreclosure rate last year was 1.2%, as its rate for vacant homes rose to 9.64% over the year. The median household income throughout Denver County slightly dropped to $63,793 from an average of nearly $78,500 in 2019.
The median property value for a typical single-family home averaged at $465,466 with a 1-year forecast of -1.7%. The median rent price throughout the region skyrocketed to $2,150, bringing its average price-to-rent ratio to about 18.04.
Despite all the interruptions and disturbances, this housing market generally started the New Year with an average 1-year property appreciation rate of +1.7%.
Investing in the Denver real estate
Denver’s high reputation to constantly be on the frontline during national recovery ever since 2012 continuously questions the validity of its investment opportunities.
The current Denver housing market has the best opportunity for long-term investments, particularly for those looking to build their passive-income portfolios. Compared to previous strategies, the buy-and-hold exit approach makes rental property ownership more lucrative today than ever before.
Here are some of the high-value indicators that might highly favor your investment in this housing market today:
- Historically-low mortgage interest rates
- Long-term cash flow translates to huge acquisition costs
- The current high price-to-rent ratio will result in more rental demand in the future
Today’s increase in property value and housing market shifts throughout Denver suggests that long-term property investments are more feasible, meaning that you’ll need more than the usual rehabbing strategy.
Finding the best strategy will allow you to efficiently tap into the property investment atmosphere and award you the ability to maximize your chances with the increased home prices at low mortgage rates.
Working investment strategies
The current average interest rate for a 30-year fixed mortgage loan is slightly below 3% throughout Denver. This rate is considerably low, and it’s making Denver-based properties incredibly affordable. Interested investors should take advantage of the current low borrowing costs to detract huge chunks from their overall home purchase.
Veteran and more experienced home investors whose intention is to build an excellent rental housing portfolio can easily justify the heightened property prices with cash flow. Unlike flippers and rehabbers, rental property owners don’t have to wait to acquire their dream property below market value.
They only have to prove their intentions of paying for it with rent money every month. Other than offsetting the heightened acquisition prices, the use of cash flow additionally allows you to continue building more equity while making payments.
The current overall average price-to-rent ratio of 18.04 suggests that renting is more affordable in Denver than owning. Putting it into a clear perspective, the current unique mix of affordability and general shortage of new listings sets the ground for a rise in rental demand.
Despite several claims from different realtors that this increase would last into the foreseeable future, it’s now clear that it might only continue until new constructions pick up the pace.
Out of all the numerous feasible exit strategies available today, none seems more befitting than building a solid rental housing portfolio. For more help navigating through the changing market indicators, fill out the contact form or call us at (720) 724-9794.