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2021 Denver Real Estate Market Investing Forecast


Apr 22, 2021 by Maurie Backman
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Note: Our market forecast includes Denver data and data from its surroundings, including Aurora and Lakewood.

Known for its hip neighborhoods, robust tourist attractions, thriving restaurant and brewery scene, and gorgeous mountain backdrop, Denver appeals to many renters who crave great food, city life, and fresh air. If you're a real estate investor, it could pay to consider scooping up income properties in Denver. Here's what you need to know about investing in the Mile High City for the first time.

Why invest in Denver?

Denver is a draw for both those seeking city life and outdoor enthusiasts. Its reputation as a health-conscious city is particularly appealing to young professionals and families -- folks who may not be all that well-established and are therefore more apt to be renters than homeowners. That makes it a good pick if you're looking to add to your real estate portfolio.

The state of the market

The Denver real estate market is loaded with opportunity, but here are some important trends to keep in mind.

1. Unemployment is high

As of January 2021, the unemployment rate in Denver was 7%, whereas nationally, it was at 6.3%. A high jobless rate could mean that in the near term, fewer people will be in a position to sign leases.

2. Housing inventory is extremely limited

As of January 2021, there was only a 0.7-month supply of available homes on the market. That means if you want to buy, you'll need to be prepared to move quickly and, most likely, engage in a bidding war with other buyers. Inventory is down on a national level, however, so this issue isn't unique to Denver -- it's a problem across the country.

3. Home prices have soared

Home values are up on a national level, so it's not surprising to see an uptick in Denver. But now, the median home price in Denver is $455,000, representing a huge year-over-year jump of almost 10%.

That said, Denver home prices have been rising steadily since before the pandemic. The downside is that you'll pay more for a home as an investor. The upside is that fewer people are in a position to buy in Denver because they can't swing today's prices, so that alone should drive rental demand.

Denver housing demand indicators

Charts courtesy of Housing Tides, an EnergyLogic company.

Here's a snapshot of what housing demand looks like in Denver today.

Unemployment

The jobless rate in Denver is slightly higher than the national average -- 7% as of January versus 6.3%. Given the number of restaurants and bars in Denver, though, that's not surprising, as that industry has been notably hard-hit during the pandemic. As things improve on that front, employment will hopefully begin to open up.

Denver Unemployment

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Data source: Housing Tides.

Median home price

The median home price in Denver is $455,000, which represents a year-over-year increase of 9.6%. That jump, however, is consistent with how home values have risen across the country. But home prices in Denver have actually been on the rise since 2016. Back then, the median home was worth $310,000. And the median home price was already over $400,000 in January 2020, before the real estate market really exploded.

Denver Median Home Price

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Data source: Housing Tides.

Median rent price

Though rent prices are up in Denver, they're not up a whole lot. The average rent price in the city is $1,756, up 0.6% year over year.

Denver Median Rent Price

Click to enlarge

Data source: Housing Tides.

Denver housing supply indicators

Here's what housing supply looks like in Denver today.

Total housing supply

As noted above, as of January 2021, there was only a 0.7-month supply of homes on the market, which means now could be a tricky time for new investors to break in. Cash offers will reign supreme in a market with such limited inventory.

Denver Housing Supply

Click to enlarge

Data source: Housing Tides.

Rental vacancies

The vacancy rate in Denver is 5.5%, which marks a 0.3% increase year over year. That's actually not a very high jump, given the impact of the pandemic. Also, Denver's vacancy rate is below the U.S. average -- 6.5%.

Denver Rental Vacancy

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Data source: Housing Tides.

Architectural billings

Architectural billings are generally used as a key indicator for commercial construction, though they can indicate what the housing market looks like as well. Architectural billings saw a year-over-year decline of 9.3% for the western part of the U.S., which Denver is part of.

Denver Architectural Billings

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Data source: Housing Tides.

Construction indicators

Construction costs

Construction costs in Denver jumped 6.7% year over year. Seeing as how the price of lumber and other commonly used construction materials has soared in the wake of shortages, that isn't so surprising. But given the way home prices have come up in Denver, it could mean new construction will be prohibitively expensive in the near term.

Denver Construction Costs

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Data source: Housing Tides.

Construction jobs

Over 1,000 new construction jobs were added to Denver's economy in January 2021 compared to a year prior. This means more housing units could hit the market in the near term, though due to higher construction costs, they'll likely be expensive.

Denver Construction Jobs

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Data source: Housing Tides.

Single-family permits

In February 2021, there were 1,001 permits issued for single-family detached homes in Denver. Once these units are complete, it could help open up the housing market and bring prices down to a more affordable level for investors.

Denver Single-Family Permits

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Data source: Housing Tides.

Multi-unit permits

In February 2021, there were about 960 permits issued for multifamily properties with two or more units. That's a good thing in general, though if Denver's jobless rate remains high, once construction on those properties is complete, landlords could have a hard time filling them. That said, it spells more opportunity for investors to buy new properties.

Denver Multi-Unit Permits

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Data source: Housing Tides.

Denver real estate financial health indicators

As an investor, it's important to get a grasp of the state of each local market you buy properties in. Here's how Denver has fared in terms of delinquencies and foreclosures.

Delinquencies

In January 2021, the delinquency rate in Denver was 3.7%, which represents a 2.2% year-over-year increase. But these numbers don't tell the whole story, as property owners have had the option to put their mortgages into forbearance during the pandemic. Home loans in forbearance aren't marked as delinquent when payments are skipped.

Denver Delinquencies

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Data source: Housing Tides.

Foreclosures

Denver foreclosures are notably low, sitting at just 0.1%. That rate also didn't increase over 2020's numbers. However, given that there's been a foreclosure ban in place for more than a year, we'd expect that number to be fairly low.

Denver Foreclosures

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Data source: Housing Tides.
Denver Foreclosures Map

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Anchor industries

Denver is home to a number of thriving industries. Here are some major sources of jobs in the city.

The U.S. government

The U.S. government is the largest employer in Denver. Many area employees have government jobs at the federal level, though there are many state-level jobs available in the city as well.

Education

Denver is home to a number of major universities that create numerous jobs in the area. And Denver's public schools employ over 11,500 people.

Healthcare

Healthcare is another key industry in the Denver metro area. Key players include:

  • Centura Health
  • Denver Health
  • HealthONE
  • Kaiser Permanente
  • SCL Health System

Schools of note

Student housing is a key driver of real estate investing success, and Denver has a number of large colleges and universities that draw in students and professors alike each year. Here are some of its largest schools by enrollment.

  • Metropolitan State University of Denver: Metropolitan State University of Denver (MSU) is located in downtown Denver but doesn't provide any on-campus housing to students. As such, it offers a great opportunity for real estate investors. MSU has a total undergraduate enrollment of 19,194.
  • University of Colorado Denver: Located in the heart of downtown Denver, University of Colorado Denver has a total undergraduate enrollment of 15,818. Interestingly, the school shares some of its facilities with MSU and the Community College of Denver.
  • University of Denver: The University of Denver is a private research university based in south Denver. It serves about 12,000 students.

Neighborhoods of note

Denver has dozens of neighborhoods that sport their own unique character. Here are a few that may be especially interesting to real estate investors.

University

The University neighborhood is a classic college town. Surrounding the University of Denver, it offers residents a wide range of eateries as well as convenient light rail access to the University of Denver campus. It's also a mere 15 minutes to downtown Denver by car and 20 minutes by light rail, making it a good spot for young professionals who want easy access to office buildings.

The average rent for a one-bedroom apartment in University is currently $1,050. Compared to last year, the average rent price has held steady, and that affordable price point is a definite draw for students.

Capitol Hill

Denver's historic Capitol Hill neighborhood is loaded with cafes, restaurants, and bars, making it a prime spot for students and young professionals. The area is also home to a large number of apartments, from modern buildings to older walk-ups. And given its proximity to University of Colorado Denver, it's a convenient neighborhood for students to take up residence.

The average one-bedroom apartment in Capitol Hill currently rents for $1,176. That's actually a 19% decrease from last year. But as an investor, that shouldn't turn you off. The demand for student housing may have decreased in the wake of the pandemic, but once vaccines roll out more broadly, that should change. And given that Capitol Hill is Denver's most densely populated neighborhood, it's clear that plenty of people are looking to live there.

LoDo

Short for Lower Downtown, what gives this Denver neighborhood an edge is that it's home to Union Station, a major transportation hub. It's also located within a mile of the University of Colorado Denver, making it a prime spot for students as well as young professionals looking to take advantage of its nightlife, shops, and attractions.

It's worth noting that property values in LoDo have been growing at a rapid pace in recent years. That's a good thing from a long-term investment standpoint, but it also means that as an investor, you might pay more of a premium for a LoDo property. That said, the average rent for a one-bedroom apartment in LoDo is $2,271, a 5% increase compared to last year.

RiNo

Short for River North Art District, RiNo has undergone serious gentrification over the past number of years, and now, the neighborhood is loaded with restaurants, shops, breweries, and apartment complexes. It's also the heart of Denver's art scene and has numerous galleries to boot. Located within two miles of the University of Colorado Denver and MSU, it's a cool spot to live for students who can swing the higher price point. It's also a neighborhood that tends to attract young professionals -- those who aren't ready to commit to buying a home and need to rent.

The average rent in RiNo is $1,752. That's right on target with Denver's average $1,756 rent on a whole.

The bottom line on Denver

Denver appeals to students, young professionals, and families alike. While rising home prices have taken buying property off the table for many residents, they give real estate investors like you an opportunity to buy homes to rent out. And that's a good way to secure a steady stream of income for the long haul.

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