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Better to Buy or Rent a Home In Denver
Real Estate

Is It Better to Buy or Rent a Home In Denver?

Newcomers to Denver and even long-term residents may find themselves weighing their options between renting and buying within the city. As the pandemic has shifted the real estate market, renting within Metro Denver is now cheaper than buying a starter home. However, purchasing a home is still enticing to many families looking to put down roots and those seeking the liberty to make their living environment their own.

Current data from January 2023 shows that the median listing for homes for sale in Denver is $600,000. For many, the choice to buy or rent may come down to finances and what they can and cannot afford. There’s also an emotional connection between homeowners and their homes, as ownership is indicative of location permanence in a way that renting an apartment or condo is not. 

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Buying Versus Renting in Denver

Renting and buying within Denver have their advantages and disadvantages. Depending on your current situation, one may sound more appealing than the other. One may be “better” suited for a growing family whereas the other may be a smart decision for a young entrepreneur who is considering making The Mile High City their new home. 

As the U.S. Federal Reserve has been increasing interest rates in an effort to curb inflation and prevent a recession, this has priced some buyers out of the market altogether. Recently, home prices have shown signs of dropping as sellers attempt to get property sold despite the higher interest rates. 

Potential homebuyers may be left wondering if it’s even possible to afford their dream home in Denver. Recent reports point towards the market settling down by Q2 of 2023 with new home listings becoming available, flattening prices, and normalization of demand. Anybody looking to buy a home may find that the market is beginning to become more reasonable in upcoming months as days on the market continue to increase and active inventory on the uptick. 

In many areas of Denver, it’s cheaper to rent a three-bedroom than to purchase a home. For Denver County, renting costs a bit more than a third of the average monthly pay while buying a home consumes nearly half. This can have a significant impact on a buyer’s financial health.

While rental prices may be cheaper at the moment within the region, this doesn’t necessarily mean it will save you money in the long run. Rent money effectively goes down the drain once it leaves your pocket. Anyone looking to put roots down in Denver will find the equity built through owning a home is conducive toward a financially stable future. 

Is Renting Right for Your Lifestyle?

Renting is an appealing option to the younger generation, as it equates to more lifestyle flexibility. Those new to Denver may want a year or two to determine which area of the city they want to commit to. RiNo, LoDo, and Capitol Hill are all appealing options for young professionals. Singles moving to the city can settle into a studio apartment while building their savings and getting a feel for their surroundings.

Many renters cite the reduction of responsibility as a determining factor in choosing to rent over buy, whether that be for repairs or general maintenance such as yard work. Sudden repair bills won’t break your budget and you won’t be expected to come up with upwards of $10,000 for a new roof. If an appliance breaks, you’re not on the hook to dip into savings for a new refrigerator or a replacement washing machine. 

Renting isn’t without its uncertainties, such as the landlord deciding to not renew the lease, thus leaving the renter scrambling for a new living situation. Rental prices can steeply increase, as many people saw during the pandemic. Fixed-rate mortgages provide assurance that you’ll be paying the same monthly payment for the entirety of the loan.

Homeowners have to juggle the risk of their home dropping in value, which can leave them upside down on the mortgage. Being upside down means owing more than your home is worth in the current market. This may leave you unable to move, whereas you can up and move when your lease ends on a rental property. Renting also allows easier relocation in the event of an exciting new job opportunity or a move necessitated by ever-changing family needs.

The Benefits of Owning a Home

Owning a home comes with a wide variety of benefits, both financial and emotional. With every payment you make towards your mortgage, you’re investing in your personal worth. Instead of a landlord pocketing the money, you’re paying off your home and building wealth via your ownership. For many, this builds a more appealing and flexible financial future once higher equity is built. 

When you’re considering buying a home, it’s important to ensure you have the financial stability to keep up with the monthly mortgage and all other associated expenses, such as HOA fees and unexpected repair bills. If the home will require remodeling projects, either DIY or hiring contractors, this is an additional expense that needs to be factored into the budget.

Despite the cost of renting being cheaper upfront, the tax savings of homeownership can recoup this money within a few years. Potential Denver homebuyers will be happy to know that the county boasts one of the lowest residential property taxes, sitting at an average rate of 0.54%, resulting in the median annual property tax payment of $2,383. This is well below the national average of 0.99%. 

Those seeking privacy will find that nothing beats not having to share a wall with noisy neighbors. In your home, you won’t have to listen to the guy above you in apartment #29 who stomps around the living room at all hours. Families can put down roots, build relationships with neighbors, participate in the local community, and unleash their creative freedom to make their house an expression of themselves. 

Whether you’re drawn to the tangible or intangible benefits of buying and owning a home, such as equity and stability, homeownership isn’t a decision to be taken lightly. For many, this is the largest purchase they will make in their lifetime and this brings its own unique set of stressors and considerations. At the end of the day, Denver is a beautiful place to call home and regardless of how you live here — you’ll always have the mountains in your backyard. 

Other Considerations Affecting Denver Area Rental and Home Prices

There are various factors at play when it comes to fluctuating home and rental prices.

Increasing Population — Denver is one of the most desirable large cities in the country. More homes are expected to be constructed to keep up with the influx of newcomers, thus potentially driving down prices and providing fresh opportunity.

Headquarter Relocation — Within the last year, many companies have made the move to Denver, resulting in higher demand for apartments and housing near downtown. Companies expanding to the region include United Airlines, VIZIO, and RES. 

Interest Rates Increasing — This factor affects many real estate markets across the U.S. as the Federal Reserve continues to fight against inflation. This may result in fewer buyers being able to purchase a home and leaving more inventory on the market for a longer period.

Still Weighing Your Options? 

We’re happy to help our clients decide which route is best for them. Buying or selling a home can be stressful but we’re here to make the process as smooth as possible. If you’re interested in learning more about current housing trends in Denver, our professionals are excited to answer your questions and help you tackle the burgeoning 2023 market. 

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