Have you thought about investing in Denver real estate properties? Then you must be wondering about the expected performance of the Denver market in the coming year. Keep reading to find out all you need to know about the Denver housing market forecast 2020.
Denver Real Estate Market 2020: Expected Performance
If you are thinking of buying an investment property anywhere in the US next year, the first thing you’d want to know is how this market is expected to perform. That’s why we’ll start our Denver housing market forecast with a summary of the most important real estate metrics in the city. The figures below have been computed by Mashvisor’s investment property calculator. Our must-have real estate investment tool for 2020 analyzes big real estate data with its predictive analytics machine-learning algorithms to provide accurate, reliable estimates of the performance of any US housing market.
Denver Housing Market 2020 Figures
- Median Property Price: $441,800
- Price per Square Foot: $290
- Real Estate Listings: 133
- Average Days on Market: 51
- Price to Rent Ratio: 20
- Traditional Rental Listings: 2,168
- Traditional Rental Income: $1,880
- Traditional Cash on Cash Return: 1.9%
- Airbnb Rental Listings: 3,096
- Airbnb Rental Income: $2,870
- Airbnb Cash on Cash Return: 3.1%
- Airbnb Occupancy Rate: 65.0%
- Walk Score: 54
Denver Housing Market 2020: Trends
The next part of our Denver real estate market forecast focuses on the specific trends which are expected in 2020:
1. Affordability of Real Estate Prices
One of the predominant overall US housing market predictions for 2020 is that affordability will continue to deteriorate for homebuyers and will constitute an even larger challenge than in 2019. However, this is mostly the result of the skyrocketing home values in some US cities including New York, San Francisco, Los Angeles, Boston, San Diego, and others.
While real estate prices are still not going through the roof in Denver, they are starting to raise concerns among experts. This includes land costs, construction materials costs, and housing affordability. Nevertheless, a Denver housing bubble is not forecast for 2020 or the next few years.
However, the situation looks different from the point of view of local and out of state real estate investors who are used to seeing significantly higher prices in other best places to invest in real estate. Although the median property price in Denver is nearly double the national average, it is much below what other markets offer. Thus, the Mile High City is expected to continue attracting both local and out of state investors.
In the screenshot below, you can see the Denver neighborhood analysis by property listing price conducted by Mashvisor’s heatmap analysis tool:
Mashvisor’s Heatmap: Denver Neighborhoods by Property Listing Price
2. Real Estate Appreciation
Speaking of home prices, another important factor comes to mind: appreciation. Since the beginning of 2000, Denver real estate values have increased by 126% which exceeds both the state and the national averages. This is good news for those investors considering the buy and hold strategy as real estate appreciation is the way to make money from properties in the long term.
Regarding 2020, Zillow expects Denver homes to appreciate by 0.4% in the next 12 months. This is below the nationwide level.
3. A Buyer’s Market
The US housing market 2020 seems to be a seller’s market as a whole. The opposite is true for the Mile High City. The Denver housing market is expected to remain a relatively cool buyer’s market. The slow increase in property prices, the inventory, and the fact that the number of available houses for sale in Denver, CO exceeds the number of buyers all point in this direction.
Related: Will the 2020 US Housing Market Be a Seller’s Market or a Buyer’s Market?
4. Real Estate Development Prospects
The PwC Emerging Trends in Real Estate: US and Canada 2020 report evaluates the real estate development and redevelopment opportunities in the Denver housing market as average. This means that investors might be able to find good deals there.
5. Investor Demand
The PwC also highlights the strong investor demand in Denver. The Mile High City has been, is, and will continue to be one of the top locations for buying rental properties in the US in 2020. This is the result of relatively affordable property prices (from real estate investors’ perspective) and an above-average rate of return.
6. Rental Demand
One of the main reasons for the strong presence of real estate investors in Denver is the demand for rental properties. Over half (51%) of the sizeable population rents rather than owns a home which means that there are more than 365,000 potential tenants. Moreover, the price to rent ratio is medium to high which means that the residents of Denver find renting to be more affordable than buying a home. These are positive signals for those considering buying a Denver investment property to rent out on a long term basis in 2020.
Regarding Airbnb rentals in Denver, demand is also strong. More than 17 million overnight visitors are expected in the coming year, mostly leisure tourists. This is because of the many tourist attractions which the city has to offer. High demand means a high Airbnb occupancy rate in 2020 which, on the other hand, is a prerequisite for a good return on investment in terms of both cap rate and cash on cash return.
Related: The Ultimate Guide to Buying an Airbnb Property with Ease
7. Airbnb Legal Issues
Since we mentioned Airbnb Denver, we have to look at the local short term rentals regulations. In the Denver housing market, only primary residences can be rented out on Airbnb and other similar home-sharing platforms. This means that out of state and full-time real estate investors cannot buy investment properties for the sole purpose of renting them out on Airbnb. However, house hacking is still a possibility in Denver. New investors in need of a home can buy a duplex, triplex, or another small multi family home to live in one of the housing units and rent out the other. In 2018, Denver Airbnb hosts generated an Airbnb income of $74.6 million.
Remember that all Airbnb Denver rental properties need to get a license before they can operate legally.
8. Friendly Landlord-Tenant Laws
The Colorado real estate market as a whole is considered to be a landlord friendly state. While the rights of both landlords and tenants are assured and protected, regulations are generally in favor of landlords. For example, Colorado is one of the very few places in the US housing market where an investor can access his/her rental property without giving prior notice to the tenant. This is an essential trend in the Denver housing market 2020 as traditional rentals are a more feasible option than Airbnb rentals.
Another of the Denver housing market trends for 2020 important for investors is the fact that Colorado has one of the lowest real estate tax rates in all of the US. The average effective property tax rate is only 0.55%.
9. Return on Investment
If you’re thinking about investing in rental properties in the Denver real estate market in the coming year, one of the most important factors is the expected rate of return. As the forecast by Mashvisor’s rental property calculator shows, the return on investment in Denver is expected to be good in 2020. Experienced real estate investors might claim that cash on cash return below 8% is not good and should not be considered at all, but they should remember that these are only city-level average values. Indeed, the best Denver neighborhoods for real estate investments in 2020 are forecast to yield significantly higher CoC return.
Moreover, analysis of the property data online available on Mashvisor shows that the average cash on cash return expected for homes for sale in Denver, CO – for both rental strategies – exceeds the levels offered by many other best places to invest in real estate in 2020.
Related: 2020 Cash on Cash Return by City: What Real Estate Investors Should Expect
10. Optimal Rental Strategy
In terms of return on investment, Airbnb Denver is the better rental strategy as short term rental properties are expected to yield a higher cap rate and cash on cash return in 2020. However, buying an Airbnb investment property faces major restrictions in the Denver housing market as only primary residences can be used as vacation rentals. Thus, traditional rentals emerge as the optimal real estate investing strategy in Denver in 2020 as investors enjoy more flexibility and freedom with them. Using the best real estate investment tools to conduct investment property analysis, they will be able to find top-performing properties easily and efficiently.
Related: 8 Best Real Estate Investment Strategies for Beginners
Denver Housing Market: Main Determinants
Now that we know the Denver housing market forecast for 2020, it’s important to understand what’s driving the local market performance. Here are the most important general factors which were taken into consideration in predicting the trends in the Denver real estate market in the coming year:
Demographics
With a population of over 716,000 residents, Denver is the largest city in the State of Colorado and the 19th most populous one in all of the US housing market. The Mile High City has one of the best growing populations among all major cities, which is a key determinant of expected demand in the local housing market as well as the local rental market.
Economy
Denver enjoys a diverse economy with no single predominant industry. Some of the most important economic sectors include scientific research, high-tech industries, finances, chemical products, machinery, transportation equipment, good processing, and mineral products. Economic diversification is an important positive factor in the decisions of real estate investors. What it means is that even if one industry takes a downturn, employees will be able to relocate to another sector relatively quickly, without failing to make rent payments on time.
Tourism
Tourism is one of the most significant industries in Denver. The city welcomes more than 17 million visitors each year, the vast majority of whom are leisure tourists. This drives strong demand for Airbnb Denver rental properties.
Denver Real Estate: Best Neighborhoods for Investing in Rental Properties
Knowing that the Denver housing market forecast for 2020 is looking good is great for real estate investors. However, if you are a beginner investor, you might not be sure where to start your real estate market analysis and property search in Denver. Analyzing all the 133 Denver houses for sale will take weeks if not months to complete. To help out new property investors, we’ve put down together a list of the top Denver neighborhoods for buying rental properties in 2020. The figures below have been computed by Mashvisor’s investment property calculator, one of the must-have real estate investment tools in 2020.
Related: How to Do a Real Estate Market Analysis in 2020
#1. Stapleton
- Median Property Price: $147,900
- Average Price per Square Foot: $130
- Traditional Rental Income: $1,960
- Traditional Cash on Cash Return: 7.8%
- Airbnb Rental Income: $2,540
- Airbnb Cash on Cash Return: 8.9%
- Airbnb Occupancy Rate: 67.0%
- Walk Score: 24
The Stapleton neighborhood offers high cash on cash return for both traditional rentals and Airbnb investment properties. However, remember that only primary residences can be rented out on a short term basis in the Denver housing market in 2020.
#2. Lincoln Park
- Median Property Price: $327,500
- Average Price per Square Foot: $346
- Traditional Rental Income: $2,350
- Traditional Cash on Cash Return: 4.0%
- Airbnb Rental Income: $3,260
- Airbnb Cash on Cash Return: 4.6%
- Airbnb Occupancy Rate: 73.0%
- Walk Score: 71
The second most profitable location for investing in traditional or Airbnb rental properties in Denver is the Lincoln Park neighborhood.
#3. Virginia Village
- Median Property Price: $369,900
- Average Price per Square Foot: $134
- Traditional Rental Income: $2,120
- Traditional Cash on Cash Return: 3.2%
- Airbnb Rental Income: $3,460
- Airbnb Cash on Cash Return: 5.1%
- Airbnb Occupancy Rate: 69.0%
- Walk Score: 57
The Virginia Village neighborhood benefits from one of the lowest property prices per square foot in all of Denver.
#4. Elyria Swansea
- Median Property Price: $328,300
- Average Price per Square Foot: $265
- Traditional Rental Income: $1,760
- Traditional Cash on Cash Return: 3.0%
- Airbnb Rental Income: $2,840
- Airbnb Cash on Cash Return: 5.2%
- Airbnb Occupancy Rate: 78.0%
- Walk Score: 67
The Elyria Swansea neighborhood offers the highest Airbnb occupancy rate in all of the Denver real estate market.
#5. Chaffee Park
- Median Property Price: $295,200
- Average Price per Square Foot: $202
- Traditional Rental Income: $1,750
- Traditional Cash on Cash Return: 2.8%
- Airbnb Rental Income: $2,520
- Airbnb Cash on Cash Return: 4.3%
- Airbnb Occupancy Rate: 76.0%
- Walk Score: 43
If you are looking for affordability and a good return on investment, you should consider the investment properties for sale in the Chaffee Park neighborhood.
#6. Goldsmith
- Median Property Price: $349,900
- Average Price per Square Foot: $291
- Traditional Rental Income: $1,700
- Traditional Cash on Cash Return: 2.7%
- Airbnb Rental Income: $3,570
- Airbnb Cash on Cash Return: 5.8%
- Airbnb Occupancy Rate: 67.0%
- Walk Score: 49
In the Goldsmith neighborhood, short term rentals provide a cash on cash return more than double the level provided by long term rental properties.
#7. Hampden
- Median Property Price: $177,300
- Average Price per Square Foot: $217
- Traditional Rental Income: $1,180
- Traditional Cash on Cash Return: 2.3%
- Airbnb Rental Income: $1,990
- Airbnb Cash on Cash Return: 4.3%
- Airbnb Occupancy Rate: 65.0%
- Walk Score: 21
One of the major reasons for the high profitability in the Hampden neighborhood is the low median property prices for homes for sale in Denver, CO.
#8. Washington Park
- Median Property Price: $826,700
- Average Price per Square Foot: $453
- Traditional Rental Income: $3,020
- Traditional Cash on Cash Return: 1.7%
- Airbnb Rental Income: $5,790
- Airbnb Cash on Cash Return: 4.5%
- Airbnb Occupancy Rate: 63.0%
- Walk Score: 54
While the Washington Park neighborhood yields a good rate of return for both rental strategies, investors should be able to spend significantly more on a down payment if they are interested in buying a rental property in this area.
#9. City Park West
- Median Property Price: $541,500
- Average Price per Square Foot: $243
- Traditional Rental Income: $2,110
- Traditional Cash on Cash Return: 1.2%
- Airbnb Rental Income: $4,530
- Airbnb Cash on Cash Return: 4.6%
- Airbnb Occupancy Rate: 67.0%
- Walk Score: 63
The Airbnb income in the City Park West neighborhood is predicted to be one of the highest in all of the Denver housing market for 2020.
#10. Washington Virginia Vale
- Median Property Price: $534,000
- Average Price per Square Foot: $180
- Traditional Rental Income: $1,670
- Traditional Cash on Cash Return: 1.2%
- Airbnb Rental Income: $3,230
- Airbnb Cash on Cash Return: 5.0%
- Airbnb Occupancy Rate: 73.0%
- Walk Score: 53
The last on our list of the best neighborhoods in Denver for buying investment properties in 2020 is the Washington Virginia Vale neighborhood, where the Airbnb rental strategy yields a higher rate of return on rental properties.
The Denver housing market forecast 2020 reveals that the Mile High City offers most of the benefits of a balanced, stable market. Things are looking good for investors in terms of both short term and long term return on investment. Knowing the best neighborhoods for rental properties, all that’s left is to sign up for Mashvisor today to find a top-performing investment property within your budget in 15 minutes.
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