How much Denver homebuyers overpaid and why it may hurt

The pandemic inflated metro Denver housing prices by 38.5% above the trend line, making the local market the most overpriced it's been in three decades, a new analysis finds.

Why it matters: The steep cost of houses is making homeownership less attainable, and current owners are facing a "reckoning" when it comes to declining home values, experts say.

By the numbers: The expected average home value for Denver stood at $461,734 in April, but the average actual sales price was $639,316, economists at two Florida universities say.

• Colorado Springs is even worse, with home prices at 45.9% over actual value — ranking the city the 23rd most inflated metro area in the U.S.

The big picture: Colorado's market is not as skewed as others across the nation, compared to past pricing trends. In 15 metro areas, home prices are inflated by 50% or more.

Context: Even when the housing bubble burst in 2008, overpricing only reached 20% in the Denver area.

• In the following downturn, average sale prices didn't recover to match expected values until 2016.

• Since, home buyers paid a premium beyond the house's expected value, especially amid the pandemic.

What's next: "I just don't think Denver will crash like before. You have too many people moving in and limited inventory," researcher Ken Johnson at Florida Atlantic University said in an interview.

• Still, he added, "there's going to be pain to go around for everybody [as home values drop]. Or you're going to have this prolonged period of unaffordable housing in terms of rents and ownership."

Related: All-cash real estate offers hit a 10-year high in Denver