Half of Denver-metro homebuyers bring six-figure incomes to closing table

More than half of the households buying homes in metro Denver are pulling down six-figure incomes, according to a new study from Zillow.

And those homebuyers, at the median, make double what households renting in metro Denver do.

“You can’t escape the rising costs of home values that are rapidly outpacing incomes. It pushes home ownership further and further out of reach,” said Zillow senior economist Aaron Terrazas.

Zillow estimates that in 2017, 52 percent of homebuyers in metro Denver made $100,000 or more in household income, up from 42 percent in 2012. That share ranked ninth highest among the 36 large metros that Zillow studied and the highest for a noncoastal city.

The median income in metro Denver for buyers was $100,288 versus $49,800 for renters. And the gap of $50,488 wasn’t necessarily about buyers getting bigger pay raises than renters. Renter incomes actually rose faster than those of buyers in that time frame, but not fast enough to keep up with rising home prices.

Renter households in 2012 reported median incomes of $39,506, which rose to $49,800, a gain of 26 percent. For homeowners, the median income rose from $85,436 to $100,288, a gain of 17.4 percent.

Here is where the math breaks down. Zillow estimates that the median home price in metro Denver in that time frame has risen 75 percent to $403,600.

Falling mortgage rates, which dropped below 3.5 percent in the fall of 2016, allowed buyers to afford higher-priced homes even when their incomes weren’t keeping pace. But rates have moved higher since then, toying with 5 percent in early November, and now closer to 4.5 percent.

And while the rate of home-price appreciation is slowing rapidly, it has yet to turn negative.

Boulder mortgage banker Lou Barnes told real estate agents with 8Z last week that home prices go through spurts of strong appreciation followed by flat periods where incomes get time to catch up. Although Denver’s home-price gains were stronger than typical, he expects that pattern to repeat as the market takes a breather.

But Terrazas countered that the price appreciation seen in metro Denver was so extreme, in large part because of a lack of new entry-level home construction, that it will be difficult to reclaim historical norms of affordability.

“Incomes have a long way to go to catch up,” he said.

The number of jobs that pay $100,000 or more in metro Denver remains a minority of the total, but there are more of them. In October, Ladders, an online site for high-paying jobs, estimated that 16 percent of all jobs listed online in metro Denver, or about 6,000, came with six-figure salaries.

With rare exceptions, buying a typical home requires two incomes. That doesn’t leave much margin for families wanting to keep a parent at home to raise the kids or for single buyers trying to get a place of their own.

And if more renters can’t qualify to get into homes, it will bar them from enjoying what is the primary source of wealth creation for most U.S. households, home equity.

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“If becoming a homeowner trends further toward the exclusive domain of society’s most fortunate, wealth inequality could see an acceleration in the years ahead,” Terrazas warns.

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