It used to be cheaper to buy an entry-level home on the Denver Metro than to rent a similar property or apartment. But according to reports, the sharp rise in housing prices before and during the pandemic has reversed the advantage of renting. Realtor.com monthly report.
According to calculations by Realtor.com, in July, the cost of a new buyer to own an initial home in the Denver area was US$2,143 per month, a 14.8% premium over the median monthly rent of US$1,866.
Realtor.com Economic Research Manager George Ratiu said: “The sharp increase in the price of homes for sale in the first half of this year has pushed the (Denver) market towards renting.”
The Standard & Poor’s CoreLogic Case-Shiller National House Price Index for June, released on Tuesday, showed that US house prices rose by 18.6% annually, setting a new record. The Denver Metro’s index increased by 19.6%, which is also a record. Phoenix, San Diego and Seattle led all major cities in annual house price growth with 29.3%, 27.1% and 25.0% respectively.
“June 2021 is the third consecutive month that house price growth has set a record,” Craig Lazzara, head of global index investment strategy for S&P Dow Jones Indices, said in the monthly update. “The past few months have been extraordinary not only in terms of the level of price increases, but also in terms of the consistency of increases across the country.”
Those record house price increases are helping to change the balance and benefit renting in some cities such as Denver. Among the 50 metropolitan areas studied by Realtor.com, it is cheaper to rent a house in 26 metropolitan areas and it is cheaper to buy a house in 24 urban areas.
Compared with renters, the markets where buyers enjoyed the biggest cost savings in July were Birmingham, Alabama, with a 33.1% discount; St. Louis, with a 29.4% savings; Pittsburgh, with a 27.7% savings; Orlando, Florida, with a 25.9% savings and Cleveland Save 25.7%.
In popular technology centers, the situation is different. The lack of housing supply and immigration push up the value of houses. Austin, Texas, has the largest rent gap, where renting can save 79.2% or $1,228 per month.
Other markets more friendly to renters include San Jose, California, where purchasing costs are 47.5% higher than renting; San Francisco, 44.4%; Seattle, 44.2%; Boston, 40.9%; Los Angeles, 39.4%; And New York, 32.0% higher.
Compared with these subways, the gap in Denver is still so small that buyers may want to lock in a fixed mortgage and avoid future rent increases. Ratiu said that the ever-increasing supply of houses for sale on the market may help curb future price increases.
“Although the purchase-to-rent ratio in the next 12 months may not be beneficial to purchases, it is not expected that Denver will experience serious market imbalances in markets such as Austin and Seattle,” he predicted.