DENVER (KDVR) — It’s cheaper to rent in Denver than it is to own, and that’s saying a lot.
The difference is a testament to how expensive the Denver area homeowner market has become. It isn’t that rent is cheap, but rather that interest rates are stacked onto sky-high home prices.
Mortgage rates began rising when the U.S. Federal Reserve pushed interest higher to curb inflation. Within a month, Denver area home sales began to decline. The mortgage payment on a median-priced home in the area went up hundreds of dollars a month on a fixed-rate loan.
Conventional wisdom says it is more cost-effective to own than to rent. Owners not only create equity in their homes but have lower mortgage rates for similarly-sized spaces.
In Denver, this is only the case with condominiums anymore – even in one of the nation’s most expensive rental markets.
The average monthly rent across all property types rose 29% from February 2021 to June 2022, according to national mortgage brokerage Redfin.
This rent includes everything from a studio apartment to a detached single-family home, so the average is beyond the average apartment rent of $1,944.
That average, though, is now less than the mortgage payments for the largest number of owned homes – single-family and townhomes.
Assuming a 5% down payment on a 30-year fixed rate mortgage rate, the monthly payment on a single-family home in the Denver area was $3,595. This has been steadily rising through the last two decades but intensified since the COVID pandemic began.
In February 2021, the average monthly mortgage payment was slightly below the average monthly rent. Now, the average mortgage is $900 more than rent.
Until this June, townhome mortgages were cheaper than rent as well. Now, the average townhome mortgage is $50 more.
Condos are still more affordable per month. The average condo mortgage was over $700 cheaper than the average rent.