Home builders across metro Denver continued to ramp up their efforts last year, starting more homes than at any time since 2007, according to a quarterly update from Metrostudy.
“2016 was another good year for home builders and the industry in Denver,” John Covert, the report’s author and director of Metrostudy’s Denver region, said in the report.
But as has been the case for last several years, construction focused primarily on higher-priced detached properties, something Covert predicts soon may change.
Builders started 11,038 homes in metro Denver last year, 22 percent more than they started in 2015, according to Metrostudy. The number of closings on new homes was up 18 percent last year versus 2015.
The price of a new detached home sold last year in metro Denver averaged $525,486, a 6 percent increase from the average new detached home price in 2015.
Assuming a 10 percent down payment on a 30-year mortgage at current interest rates, a household would need $105,315 in annual income to qualify, according to the website Mortgage Calculator.
Given the median household income in metro Denver in 2015 was $70,283, the typical household would need to boost its income by half to afford the average new home available in the market.
Among the new homes built in metro Denver last year, nearly seven in 10 were priced above $400,000, while 27 percent were priced at $500,000 or more, both record high shares.
As a point of reference, the average price of a home sold in December in metro Denver, new or used, was $398,179, according to the Denver Metro Association of Realtors.
Rising mortgage rates will only compound the affordability problem, and some builders are responding with a shift in strategy.
“The need for more affordable alternatives is more pronounced than ever. Many builders are preparing to introduce more affordable product lines to accommodate the growing first-time and entry-level buyer segment,” Covert said.
Smaller homes on smaller lots likely will become more common in new home communities throughout Denver. Covert also noted that metro Denver saw its largest condo project in a decade, the 342-unit Coloradan by East-West Partners next to Denver’s Union Station, break ground in 2016.
Although a tenth of the project is targeted as affordable and will be priced under the mid-$200,000s, the bulk of the units will cost from just under $300,000 to $1.3 million, not including the penthouses.
