How much home can households afford in metro Denver? New calculator has the answer. (2024)

Metro Denver represents an extreme case when it comes to how much home prices have run ahead of household incomes. But how tough is it for the typical household to get into a home, and what kind of jobs do buyers need to afford something in the middle of the road?

The median household income in metro Denver is $99,000, which is above the U.S. median of $74,580, according to U.S. Census Bureau estimates released last fall. That is the middle point, with half of households making more and half making less.

In an ideal world, the median home would be affordable to someone earning the median income. But that hasn’t been the case in Denver and most of the country for a long time. What has changed instead is a widening of the gap between what most people can afford and what homes cost.

“The root cause of the housing affordability crisis is simply that there are just not enough homes in America,” said Orphe Divounguy, senior economist at Zillow. “Filling the housing deficit continues to be the key to improving affordability in a sustainable way.”

RELATED: Can you afford to buy a house? Try this income and home price calculator.

The issue has come to a head as 40 years of lagging construction productivity growth has run headlong into a surge of buying demand from millennials, the largest generation in U.S. history, who are increasingly pushing into their prime homebuying years, Divounguy said.

Zillow Home Loans recently released BuyAbility, an affordability calculator to help buyers estimate in “real-time” how much home someone can afford. The Denver Post used that calculator and applied average debt burdens and the most recent occupational wage data for metro Denver to determine what kind of jobs might allow buyers to get into a typical home.

For this analysis, households were assigned a monthly auto loan payment of $700, a monthly credit card payment of $271 and student loan payments of $288, which LendingTree reported were the averages last year of people carrying those types of debts in Colorado.

Other debt payments limit the size of a mortgage borrowers can qualify for and the debt averages for only one person were included. When it comes to total debt owed, Colorado residents carry the heaviest average burden of any state at $158,481, in part because of the relatively large mortgages they are taking on, according to a ranking from the website Creditsecrets.com

Zillow assumed a 30-year mortgage rate of 7% and an annual homeowner’s insurance payment of $945 a year. Property taxes were adjusted to 0.6% of a home’s value, which is what Tax-rates.org said is the average for Colorado.

A household earning the median income and carrying what LoanTree said is the typical individual debt will qualify for a home of $263,000, assuming a 20% downpayment.

Here’s where the big disconnect comes in — the median price of a single-family home sold last month in metro Denver was $660,000, according to the Denver Metro Association of Realtors. That’s more than twice what a household making nearly $100,000 a year can afford, according to the BuyAbility calculator.

Assuming that a typical household could boost its buying power up to $300,000, say by purchasing used cars instead of new ones or eliminating student debt, the pickings are still slim.

Of the 12,692 single-family homes sold in metro Denver through May, only 80 were priced below $300,000.

Townhomes or condos, with a median sales price of $407,250 last month, are more attainable. Of the 4,456 “attached” homes sold in metro Denver through May this year, 824 sold for below $300,000, per DMAR. But association fees, which weren’t included in the calculation, can lower affordability there.

About 18.5% of those types of homes were affordable to someone at the middle point income, not including association fees. Combined, fewer than one in 20 homes and condos sold this year would have been attainable for a household at the median income in metro Denver.

One issue with using median household incomes is that it includes a mix of single-person households, couples with one or two incomes, as well as larger families with wage earners across multiple generations.

Complicating the mix, more unrelated buyers are going in together to purchase homes, sometimes bringing four incomes to the table to cope with the region’s high home prices.

The usual scenario though is two wage earners combining incomes to qualify for a mortgage. In metro Denver, the median wage across all occupations is $75,910 or $151,820 for two people at the median wage, according to the U.S. Bureau of Labor Statistics.

Plugging that into the calculator puts affordability closer to $520,000. In Colorado, however, about 28% of households consist of just one person.

In terms of sheer numbers, the two most common occupations in metro Denver are office and administrative support, earning a median annual wage of $53,350, followed by sales, where the median wage is $70,680. Combined, that’s $124,030 a year, which would put a home priced at around $385,000 or below within reach, per the Zillow calculator

That is also close to the price point that a construction worker, at a median wage of $62,650, and an elementary school teacher, median wage of $67,110, could comfortably buy. But finding something under $400,000 isn’t easy.

Landsea, a builder based out of Dallas, has new homes starting at $374,950 at its Pintail Commons in Johnstown Village. The community is about an hour north of Denver not far off Interstate 25, just east of the new Buc-ee’s.

Land is cheaper in Weld County, which helps, and the homes lack basem*nts, which also lowers costs. They are paired homes, formerly called duplexes, meaning they share a wall with another home, and they are two stories, said Tom Zieske, vice president of operations for Landsea in Colorado.

There are four standard floor plans ranging from 1,100 to 1,600 square feet. Construction contractors like the repetitive “plug and play” that standard designs provide and they cut down on costs associated with customization and repairs after move-in, he said. They are also energy efficient and equipped with the latest home technology.

“At this price point, we are trying to change the game,” Zieske said.

One of the biggest ways Landsea helps its customers, who are primarily renters looking for a first home, is via an interest rate buydown, which can take a 7% or higher rate on a 30-year mortgage down to 4.99%, said Lannie Ferbend, a local sales manager at Landsea Homes.

“That can provide $600 a month saved. It helps a ton,” said Ferbend.

With everything else the same, a household at the median income gains an extra $50,000 or so in buying power from that kind of rate adjustment, according to the BuyAbility calculator.

Ashley Hunter recently moved into Pintail Commons with her two boys after a divorce, using equity from her prior home to afford a new home on a single income. The drive into Fort Collins, where she works, is about the same amount of time as it was from Windsor and she said she is happy with the floor plans.

“People are renting apartments in this area for way more money,” she said, adding that the typical rent in the area is $1,800 a month.

Nicole Rueth, a mortgage lender affiliated with Movement Mortgage, said most of her clients are dual-income households. If they can get to 120% of Denver’s area median income, they can obtain a lower interest rate and a break on mortgage insurance. She has seen them qualify for homes of around $508,000.

“You can get a condo, townhome or a smaller single family for that,” she said.

Making a larger downpayment also helps and Rueth said she is seeing a considerable amount of gift funds or assistance from family and friends and in some cases outright cash purchases.

“Even when someone says they can’t find gift funds, when they find the right house, aunts come out of the woodwork,” Rueth said.

Going with FHA and VA loans allows for a higher debt-to-income ratio than going with a conventional lender, which provides some stretch on the size of the mortgage. But one of the best ways to improve buying power is to eliminate other debts.

A household at the median income for metro Denver with no other debt could qualify for a home costing $465,000, according to the BuyAbility calculator.

Using the scenario described earlier with a 20% downpayment and the debt levels from LendingTree, a household would need to make about $180,000 to buy a median-priced single-family home. That would require a downpayment of $132,000 at 20%, which is a more likely scenario for a move-up buyer.

Lawyers in metro Denver have a median wage of $198,750 and they could clear that hurdle solo, and so could a nurse anesthetist, judge and several top-level managers. In terms of two incomes, an avionics technician and a salaried chiropractor buying together could do the same, and so could a biology professor and an accountant at the median.

But homeownership remains elusive for the bulk of workers in the service industry. A fast food counter worker, median wage of $35,260, and a restaurant host, median wage of $33,340, can together afford a home costing $237,000, even after lowering monthly debt payments to $500 and providing 20% down, according to the calculator. It may feel like ancient history given what has happened to home prices since, but 12 years ago, the median price of a single-family home sold in metro Denver wasn’t too much above that price point, according to DMAR.

How much home can households afford in metro Denver? New calculator has the answer. (2024)

FAQs

How much do you need to make to afford a house in Denver? ›

The median sale price of a starter home in Denver is $405,000. In order to afford this, first-time homebuyers in Denver should make $127,808 per year, up 5.6% from 2023.

How much house can I afford if I make $36,000 a year? ›

On a salary of $36,000 per year, you can afford a house priced around $100,000-$110,000 with a monthly payment of just over $1,000. This assumes you have no other debts you're paying off, but also that you haven't been able to save much for a down payment.

How do you know how much a house you can afford? ›

Most financial advisors recommend spending no more than 25% to 28% of your monthly income on housing costs. Add up your total household income and multiply it by . 28. At most, you may be able to afford a $1,120 monthly mortgage payment.

How much house can I afford if I make $70,000 a year? ›

One rule of thumb is that the cost of your home should not exceed three times your income. On a salary of $70k, that would be $210,000. This is only one way to estimate your budget, however, and it assumes that you don't have a lot of other debts.

What is a livable salary in Denver? ›

The study says people in the city need an hourly wage of $66.62 and a salary of almost $140,000 to live comfortably. While the comfortable wage across large Colorado cities is over $45 an hour, the Colorado minimum wage is currently $14.42 and in Denver, it's $18.29.

What is the housing affordability index in Denver? ›

Denver-Aurora-Lakewood, CO Housing Affordability Index is at a current level of 79.90, down from 107.90 one year ago. This is a change of -25.95% from one year ago.

Can a single person live on $36,000 a year? ›

If you want to have a minimalist lifestyle, 36k/year is more then enough. If you want a home, family, car, insurance and some "toys", it's not going to be enough, at least in a majority of places in the U.S. But again, the term "decent" is pretty objective.

Can I afford to buy a house making $40,000 a year? ›

For homebuyers with a $40,000 annual income (a $3,333 monthly income), traditional guidelines of a 36% debt-to-income ratio give a maximum house payment of $1,200 ($3,333 * . 36). Each example has the same amount for taxes ($2,500), insurance ($1,000), and APR (6%) for a 30-year loan term.

How much house for $3,500 a month? ›

A $3,500 per month mortgage in the United States, based on our calculations, will put you in an above-average price range in many cities, or let you at least get a foot in the door in high cost of living areas. That price point is $550,000.

What is the rule of thumb for a house you can afford? ›

To determine how much you can afford using this rule, multiply your monthly gross income by 28%. For example, if you make $10,000 every month, multiply $10,000 by 0.28 to get $2,800. Using these figures, your monthly mortgage payment should be no more than $2,800.

What is the 28/36 rule? ›

According to the 28/36 rule, you should spend no more than 28% of your gross monthly income on housing and no more than 36% on all debts. Housing costs can include: Your monthly mortgage payment. Homeowners Insurance. Private mortgage insurance.

How much house can I afford and live comfortably? ›

One way to start is to get pre-approved by a lender, who will look at factors such as your income, debt and credit, as well as how much you have saved for a down payment, to come up with loan amount you can afford. One rule of thumb is to aim for a home that costs about two-and-a-half times your gross annual salary.

Can I afford a 300K house on a 60k salary? ›

An individual earning $60,000 a year may buy a home worth ranging from $180,000 to over $300,000. That's because your wage isn't the only factor that affects your house purchase budget. Your credit score, existing debts, mortgage rates, and a variety of other considerations must all be taken into account.

Can I afford a 200k house on a 70K salary? ›

The house you can afford on a $70K income will likely be between $290,000 to $310,000. Aside from your gross monthly income, lenders look at your credit report, down payment, monthly debt payments (including car payments and personal loans), and your estimated mortgage rate, among other things.

Can you live off of 80k a year? ›

Your household size

Depending on the size of your family or household, an $80,000 salary may comfortably cover your living expenses. If other people in your household, such as children, depend on your income, consider how much it costs to pay for their living expenses in addition to your own.

Is $40,000 salary enough to buy a house? ›

Home Affordability Examples

For homebuyers with a $40,000 annual income (a $3,333 monthly income), traditional guidelines of a 36% debt-to-income ratio give a maximum house payment of $1,200 ($3,333 * . 36). Each example has the same amount for taxes ($2,500), insurance ($1,000), and APR (6%) for a 30-year loan term.

What house can I afford with 100k a year salary? ›

On a salary of $100,000 per year, as long as you have minimal debt, you can afford a house priced at around $311,000 with a monthly payment of $2,333. This number assumes a 6.5% interest rate and a down payment of around $30,000. The 28/36 rule is often used as a guide when deciding how much house you can afford.

What salary do you need to buy a house in Colorado? ›

A Rise in Costs

Paired with the average home value of about $561,000 according to Zillow, buyers would have to make over $160,000/year to qualify, assuming they also paid 20% down.

What price house can I afford if I make $50000 a year? ›

The rule of 2.5 times your income stipulates that you shouldn't purchase a house that costs more than two and a half times your annual income. So, if you have a $50,000 annual salary, you should be able to afford a $125,000 home. Explore what your mortgage payment might be with today's rates.

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