Housing affordability is improving this year in metro Denver, enough to give buyers a little bit more breathing room in terms of the income they need to show lenders, according to a study from Canadian real estate brokerage Zoocasa.
Zoocasa estimates that someone buying a home at the median price in metro Denver of $370,000 in April would need $64,284 in income to qualify for a mortgage, assuming a 20 percent down payment and an interest rate of 4.5 percent on a 30-year loan.
A study in March based on year-end numbers showed the median home price at $375,000 in metro Denver required a household income of $65,148 to qualify for a 30-year loan.
“Overall affordability for homebuyers has improved slightly in Denver between December 2018 and April 2019,” said Penelope Graham, a managing editor at Zoocasa.
Buyers of a median-priced home in Denver needed $864 less in income to qualify in April than they did in December. While that isn’t a big drop, it does represent a shift after years of increasing income requirements.
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Somewhere between half and 55 percent of households in metro Denver can afford to buy the median-priced home in this market, according to the study, which doesn’t include the latest drop in rates below 4 percent.
The study assumes buyers make a 20 percent down payment, which represents $74,000 at metro Denver’s median price. That represents a big hurdle for many first-time buyers, who typically put down much smaller amounts.
“It’s important to note that households making a smaller down payment would require a higher income in order to qualify for a larger mortgage, thus requiring them to be at a higher income group,” Graham said.
Detroit; Columbus, Ohio; and Oklahoma City are the three most affordable cities of the 35 major metros examined in the study. San Francisco and Los Angeles were the two least financially accessible cities.
Home price gains nationally have been softening for more than a year. The S&P CoreLogic Case-Shiller National Home Price Index rose 3.5 percent in April, its slowest annual pace since September 2012, according to an update Tuesday.
Denver’s home price index also slowed, rising 3.8 percent in April, down from a 4.3 percent annual pace in March and a 5 percent pace at the start of the year.
But the chill may be about to lift, thanks to lower interest rates, said CoreLogic deputy chief economist Ralph McLaughlin.
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“The U.S. housing market is showing signs the cooldown may end within the next few months,” he predicted Tuesday in his analysis of the latest index numbers.
The hunt for affordability continues to weigh heavily on the market and is creating a significant variation in rates of home price appreciation, according to the National Association of Realtors.
The industry group found that U.S. homes ranging from 750 square feet to 1,750 square feet in size are appreciating at a 12.1 percent annual rate this year, compared to a 3.4 percent increase for homes between 3,000 square feet and 6,000 square feet.
