BUYER'S RESOURCE »
Everyone has been hearing crazy stories about the real estate market in the Denver metro area. It seems that many people have decided to hold off on buying due to what they are hearing about the current market. This may be the right thing to do at the moment for some people, but it may not be the best for others. Let’s investigate this deeper by looking at some facts.
Although we do not have a crystal ball to predict the future, we do know what is going on now. Everyone who is paying attention to the market at all knows that we have low inventory in the Denver metro area, we are seeing multiple offers on homes, and we are seeing offers well over asking price. For a more in-depth look at the current market conditions, check out our most recent Denver Market Update blog.
According to RentCafe®, as of February 2022, the average rent in Denver was $1,879 for 842 square feet. 842 square feet is the average apartment size, and in reading the fine print, this is usually for a 1-bedroom apartment. Of course, apartment size may vary. RentCafe® based their average price on location, quality, and size. If you look in specific neighborhoods in Denver, that number can be even higher; for example, the average rental price for LoDo is $2,407, and the average rental price for Congress Park is $2,390.
So, what does this mean for you if you are currently renting? Would it be better to buy? One of the factors to consider is monthly payment. Let’s see what your monthly payment would look like if you are purchasing a property with similar square footage as the 842 average mentioned above. Using an actual example from the MLS to get tax and HOA information and attaining the interest rate, insurance policy amount, and private mortgage insurance amount from one of our trusted lenders, the monthly payment for a home costing $300,000 in the Denver metro area would be approximately $2265. Of course, this information is based on credit score, the amount you put down, and your specific situation, so your actual payment may vary.
Although the monthly payment is above the rental average for the Denver metro area, it is below the rental average for some communities in the Denver metro area such as LoDo and Congress Park as mentioned above. However, keep in mind, there are more things to consider besides just monthly payment.
Even though your monthly payment and rent may be similar, it is also important to consider that if you buy a home at this point, you will begin to build equity on a monthly basis, pay down your mortgage, and you will gain appreciation, which isn’t a possibility when you are renting. If you had purchased a home in 2021, you would have seen 17% in appreciation. Interest rates are another concern. Currently, we are seeing them go up fairly rapidly, and at this time, the longer you wait to buy, the higher your interest rate could be. This could really impact your monthly payment. Yet another thing to consider is that a mortgage is more of a fixed payment than a rental property would be. There is not a cap on what a landlord can ask someone to pay at time of renewing a lease, meaning your monthly rent could go up by several hundred dollars. With a mortgage, your principle, interest, and private mortgage insurance are fixed; they will never change. As you can see, there are many factors involved when deciding to rent vs buy, and it is not just about monthly payment. It is important to sit down with your real estate agent and a trusted lender to look at your situation and see what is best for you.
At TK Homes, we will not only help you find a good lender, but we will go over the details of your particular situation with you. We will give you the information you need, so you can make an educated decision about what is best for you—buying or renting. Call us today, and let’s see what makes the most sense for you!
~ Written by TK Homes REALTOR®, Mary Smith