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

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.”

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 basements, 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.