Why is Denver so expensive?

When talking about the most expensive places to live in the US, only a few people will think of Denver, Colorado. But the city is gradually becoming one of the most expensive in the country. So why is Denver so expensive?

Housing is the major reason Denver’s cost of living is 28.7% above the national average. Homes here cost over $600,000, and the average rent is $1,879. The reasons for expensive housing include demand over supply, reduced building rate, low mortgage rates, growing population, and focus on luxury homes.

Regardless of the high cost of homes in the city, it could still be a good place to buy a house if you have the financial capacity. Home prices haven’t fallen since 2011. Here, we discuss why Denver is so expensive.

Cost of living in Denver 

Denver is an expensive city to live in. According to Bestplaces, the cost of living in the city is 28.7% higher than the national average. It’s also higher than the Colorado state average. The city’s housing cost is 84.3% above the national average. However, it’s not just housing that makes the cost of living here high. Groceries are also slightly costlier than the national average, and so is transportation. But barring the cost of housing, this would be a fairly affordable city.

The major reason responsible for the cost of living in the state is accommodation. Housing prices have accelerated in the last few years to make it one of the fastest-growing real estate markets in the country. According to data from S&P CoreLogic Case-Shiller Home Price Index, the price of homes in the Denver metropolitan area has increased by 21% in the last year.

With the growth, it’s the 9th fastest-growing housing market in the country. The city is one of the most expensive of 50 cities, with typical home sales at $598,233 in one estimate. According to Zillow, it’s even higher at $642,009.

Why is Housing Expensive in Denver?

There are several reasons for the high cost of homes in the city. They include

1.  Higher Demand vs. Low Supply

The disparity between demand and supply is the root of that high price. Due to the high proportion of millennial buyers looking to buy homes, the demand has increased. Fewer homeowners are putting their houses on that market. Due to the high price of homes everywhere and the high mortgage rate, many aren’t willing to leave their homes. Even the elderly who usually sell their homes to move to another location for retirement are now opting to stay in their current residence.

2.  Reduced Building Rate

The rate of construction has also been reduced. Based on the data, the building is lagging behind population growth. Colorado is yet to beat the building levels it reached before the Great Recession. But things are changing. According to Metrostudy, there’s been a 22% rise in single-family home construction since last year. But it’ll take a long time before any newer construction makes any significant dent in the housing prices.

3.  Growing Population

The population of Denver and the whole of Colorado has been growing significantly. This means more people are willing to pay more for the limited homes available. With the city boasting of great outdoors, many people who can’t afford to live in other sunny places such as Hawaii and California are moving to Denver and surrounding areas.

Compared to California or Hawaii, Denver real estate is relatively cheap. So, migrants from more expensive places or with higher income move to Denver and spend high on real estate. The result is more people can no longer afford homes that were once cheap.

4.  Lower Interest Rates

The interest rates were very low for a long time, influencing the demand for homes. Since almost everyone needs a mortgage to buy homes, low interest rates make it affordable. So people are willing to spend more. The result is that people could pay for more expensive homes. This is part of what pushed the price of real estate in Denver. However, the hike in the mortgage rate now means more people can’t afford it. But it’ll take a while for the prices to decrease since demand is still high.

5.  Builders Focus on Luxury Homes

Another issue causing the low supply of affordable homes in Denver is that builders focus on luxury homes. Most people willing to spend a lot on homes want the highest quality. Builders cater to these needs by building luxury homes that match their tastes.

Is It Advisable to Buy A House in Denver?

There’s no best answer to this question. It depends on your financial situation and whether you want to settle in the city. Many have described the current housing market as a bubble which means it’s possible for it to crash and home prices to fall. But there’s no assurance of that. The price could keep increasing.

However, if you want to buy a home in Denver, it’s best to go to the suburbs, where home prices will be a bit more affordable. With the prices increasing over the last decade, there’s no assurance they’ll come down. Demand is still high. You want to ensure you can afford what you’re buying. Apply the 28/36% rule, or don’t spend more than 3 times your annual income on housing. That’ll guide you to make the right decision based on your finances.

Pros and Cons of Living in Denver

You need to note the pros and cons of the city before deciding whether it’s right for you.


The pros include:

  • Great air quality
  • Easy access to fitness options, healthy food, and cheaper groceries than in some parts of the city
  • Mid-sized city that’s easy to navigate 
  • Liberal city with a gay governor
  • Going population
  • Great weather with mostly warm winter

The cons include:

  • The cost of living doesn’t match the wages
  • Homelessness crisis due to unaffordable housing
  • Public transport options here aren’t the best
  • The city is mostly car-dependent
  • Bad drivers and a high rate of accidents
  • It’s landlocked and isolated.

In Conclusion

Since 2000, the cost of homes in Denver has increased by 204%.   With the cost of homes being high, rental costs are equally high. The average rent for an apartment in the city is $1,879. All these make the city very expensive to live in. However, once you can look beyond that, Denver is affordable.