Look just at median home prices, and metro Denver is one of the most expensive housing markets in the country. But look at what buyers get in square footage, and things are still on the high side, but not as pricey.
Zillow, for example, lists metro Denver as the eighth most expensive housing market at the end of last year, just behind the New York City metropolitan area. Ranking by price per square foot, or what buyers get for what they pay, metro Denver ranks as the 21st most expensive market out of the 100 largest metros, according to a blog post from RealtyHop, a home search portal.
Denver has seen a substantial rise, going from $293.86 a square foot in 2019, before the pandemic, to $367.62 a square foot this year. But well before that, migration from costlier markets was pushing up prices.
“Migration has inevitably driven up home prices in places like Denver. While still affordable compared to cities like San Francisco and LA, Denver is now one of the least affordable cities in the country,” said Shane Lee, a data scientist with RealtyHop.
RealtyHop looked at how many square feet a buyer could purchase in the 100 largest metro areas at the median U.S. home price of $375,000.
In San Francisco, the most expensive large market, a buyer would get the equivalent of 374 square feet at a median price per square foot of $961.80. For those willing to live in Detroit, that amount would buy 5,109 square feet of home at a median price per square foot of $69.30.
Granted, neither are typical home sizes in either market, but the exercise, based on 1.5 million listings available on RealtyHop in the first quarter, offers a way to compare. In Denver, a buyer paying $375,000 could get 1,067 square feet. Assuming a 20% downpayment at current mortgage rates, that household would need to make $84,000 a year.
The priciest markets in square foot terms were mostly located in coastal states with California dominating. A more favorable climate combined with limited room to grow given the ocean’s edge pushes up prices.
“Major cities in coastal states tend to have higher paying jobs and, therefore historically higher home prices and cost of living,” Lee said. “Once you move inland, states generally have less population, more land, and therefore are less dense. Homes are generally bigger.”
Scottsdale, Ariz., was the most expensive market in an interior state at $419.23 per square foot and Denver was next after it. Reno, Nev.; Austin, Texas; and Boise, Idaho were among the more expensive interior cities, allowing Texas to be classified as an interior state.
The best deals per square foot, aside from Detroit, were available in Birmingham, Ala.; Cleveland; Lubbock, Texas; and Wichita, Kan.; Buffalo, N.Y.; and Fort Wayne, Ind.
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“COVID-19 further accelerated this shift from coastal to inland cities, as companies embraced remote working and families looking for homes with larger spaces,” Lee said. It also derailed what had been a movement toward density and tiny homes.
One concern for Denver and other popular cities is whether high home prices and rents will force people to move, something the most recent migration numbers seem to be indicating. Lee is among those who think the big gap that RealtyHop found across the country will shrink over time.
“Over time, we should see the price difference between coastal cities and inland cities narrow as more and more people get priced out of the more expensive markets,” he predicted.
