To Rent Or Buy…

A Look At Denver Metro Area Rentals & Real Estate

Should you Rent or Buy? It’s the age old question that everyone seems to answer with, “Well, buy – duh,” especially with interest rates so low. We want to look at the reasons behind whether you should rent or buy in 2022. Let’s look at what we saw from 2021 to predict what we should expect next year. This may help you decide whether or not to commit to buying a new home.

The Rental Market

Colorado is a state with a continually growing population. This greatly affects the rental market in the Denver Metro Area very specifically. After all, those moving to a new state typically like to make sure they like living there before committing. Buyers’ remorse on that level can be brutal. The population of Colorado grew 14.8% since 2010. The Denver Metro Area, by itself, grew 1.24% since 2020, and 25% since 2010!

In the past year, rental prices in Colorado rose 14.9%, bringing the average to $1,840 for a one bedroom apartment. Keep in mind this is heavily skewed by higher density population areas like Denver and Boulder.. The average cost of a one bedroom apartment in Denver is just around $2,222/mo while a two bedroom apartment is about $3,333/mo. Aurora had the highest growth rate in rental prices over the past year: 29.36% increase in average single bedroom apartment rental price, bringing the average to $1,862.

When looking at the national averages, Colorado looks almost sub-par. Rental prices rose 21.13% across the nation, heavily influenced by more competitive markets like Oregon, Pennsylvania, South Dakota, and Florida. The national average for apartment rentals is currently sitting at $1,680, with the lowest price in Arkansas ($726/mo).

The Real Estate Market

Colorado’s real estate market has been extremely competitive for two years now; and fairly highly competitive for longer than that. Ever since COVID came around, listings in the Denver Metro Area have been flying like hot-cakes! Home sales prices have been rising about 15.9% over last year’s average sales price. This brings the average home value to around $629,000. Denver does have a healthy Luxury Market, so don’t look at that average and think there’s nothing at lower costs.

The main obstacle with the Denver Metro Real Estate Market is that the houses that come onto the market leave within a week. There are a lot of buyers, and not a whole lot to browse through. This has created an atmosphere of offering higher than list price and taking properties as they are. For many buyers, this makes homebuying a little bit more stressful. They have to be ready with financing and their offer and have very little time to really look at the property before making a decision.

Interest rates on mortgages have remained low throughout 2021. As we “eavesdrop” on the Federal Reserve and their predictions on interest rates in 2022, we may start to feel a sense of urgency for homebuyers. They have stated, however mildly, that 2022 could see up to three interest rate increases – which means mortgage rates are due to go up. We’ve heard this before, and the Federal Reserve will probably make their decisions based on current market trends, so take this with a grain of salt. We wrote a blog about recent interest rates not too long ago, check it out.

What To Choose?

Now the hard question: What to choose: Renting or buying?

As realtors, we still highly recommend that you buy. The local real estate market is very strong and the value and equity you can maintain in a home is quite desirable given the current state of our economy. Renting does have its upsides, though, especially in a crazy competitive market like we’re seeing currently. Costs of repairs and maintenance, for example, don’t fall on you, while inflation continues to make home repairs more expensive. There are far more rental options available than there are single-family homes or condos. In fact, we’re close to our all-time low in number of listings as we close out 2021!

You can ultimately let the decision rest on your financial situation. Check with your financial advisor or local home loan expert to see what you can work with or qualify for. Give us a call and we can help you look through real estate options in the area and get you in touch with the institutions that can help you make the next move.