Is Now a Good Time to Buy a Home in Denver?

Looking to buy in Denver? Here's what you need to know.

There are plenty of perks to living in Denver -- great restaurants, a unique climate, and spectacular mountain views. But if you're looking to buy a home in Denver, you may face some challenges in today's real estate market. Here's what you need to know.

Inventory is down

In May, Denver only had a 0.4-month supply of available homes on the market, according to data compiled by Housing Tides, an EnergyLogic company. That represents a 1.78% decline from last May.

Now to be clear, housing inventory is down on a national level. In May, Housing Tides reported a 1.1-month supply of properties available to purchase across the U.S. For context, a 4- or 5-monthly supply is needed to create an equalized housing market, and when supply sinks below that threshold, buyers lose out and sellers get the upper hand.

When inventory is low, buyer demand tends to tick upward. And when demand exceeds supply, it can make home prices more expensive. That's precisely what's happening in Denver today.

Homes are less affordable

In February of 2016, the median home price in Denver was $325,000. In May of 2021, the median home price was $532,000. That represents a gain of over 22% from the previous May, and it also means that you may struggle to find a home within your price range if you have your heart set on Denver.

Now one thing you should know is that you may find a less expensive home if you're willing to look at Denver's suburbs. But if you want to live in Denver proper, be prepared to pay a premium.

Mortgage rates are low

While home prices in Denver may be high and inventory may be limited, the one benefit of buying a home there today is that Colorado mortgage rates are sitting at very competitive levels. As of this writing, the average 30-year fixed mortgage rate for a new home purchase is 3.133%. And if you can swing the higher monthly payment that comes with a 15-year loan, you may be eligible for a mortgage rate as low as 2.310%.

Should you buy a home in Denver today?

Though mortgage rates are pretty low on a national level, Denver home values have spiked in the past year. Granted, that situation is not unique to Denver. Home values are inflated on a national level, and until more properties hit the market, that's unlikely to change.

If you have a healthy enough budget to afford a home in Denver, and you find one that checks the right items off your wish list, then now could be a good time to buy. But if purchasing a Denver home means taking on a higher mortgage than you're comfortable with, then you may want to hold off on buying.

Denver is a great place to live, and planting roots there may be important to you. But if you can't swing a home of your own, it's not worth putting your finances at risk to buy today. Instead, you may want to sit tight, see what inventory looks like a year from now, and look at buying then. The good news is that mortgage rates are likely to stay low well into 2022. So you may have plenty of opportunity to lock in an affordable mortgage at that time.