The housing landscape in Colorado is shifting in ways that are challenging both homebuyers and property investors. After years of pandemic-era market frenzy, 2025 and early 2026 have brought a more complex picture: mortgage rates remain elevated, squeezing purchasing power, while rental income growth has softened, in many cases failing to keep up with rising costs. The result? Many investors and small landlords are feeling the squeeze.
High Mortgage Rates Still Squeeze Buyers and Investors
Mortgage rates across Colorado continue to hover well above the ultra-low levels seen during the pandemic. Through early 2026, 30-year fixed rates have fluctuated roughly between 6.8% and 7.3%. Compared with the sub-4% environment seen just a few years ago, today’s rates significantly erode purchasing power: households now need much higher incomes to qualify for the same home loan they might have secured previously.
For real estate investors, this shift matters. Higher rates mean bigger monthly payments and tighter cash flow — especially for those who financed property acquisitions with mortgages rather than all-cash deals. Many landlords are now seeing their finance costs climb while the revenue side isn’t keeping pace.
Rental Income Growth Has Slowed, Or Even Reversed
While it may seem counterintuitive that rents aren’t booming in one of the country’s most desirable states, the data tell a clear story: rental rates have softened or grown very modestly in key Colorado markets.
Median rental prices are trending down. Data from late 2025 shows that median monthly rent across Colorado was about $1,840, down roughly 5.7% year-over-year.
Vacancy rates are rising. Higher supply, particularly in Denver metro areas with tens of thousands of new units delivered in recent years, has pushed vacancy rates to some of their highest levels in over a decade.
Rent growth is soft. Even where average rents are holding steady or ticking up slightly (as seen in some Denver reports), broader data points to cooling pressure on landlords to raise rents aggressively.
For many landlords, especially those owning older or lacking-amenities properties, this means fewer opportunities to increase rents without risking longer vacancy periods.
A Growing Gap Between Costs and Rental Revenue
The combination of high mortgage rates and soft rental growth is creating a cash-flow crunch:
- Higher debt service costs: Elevated interest rates mean landlords pay more each month just to service their loans.
- Rents not keeping pace: With rents flat or even declining in some submarkets, the traditional hedge of rental income rising to cover higher costs hasn’t materialized.
- Rising operating expenses: Property taxes and insurance costs have also been increasing in many parts of Colorado, further squeezing profit margins.
For small investors and individual landlords, who often don’t have the deep pockets or diversified portfolios of large institutional owners — this tightening spread can mean negative cash flow or sharply reduced profits.
Why This Matters for the Broader Market
Colorado’s housing market has cooled since the extreme volatility of the early 2020s. Recent reports point to a more balanced market overall, with rising inventory giving buyers more options and modest price moderation in certain areas. However, that stability masks the financial stress many property owners face behind the scenes.
This imbalance may also influence housing affordability statewide. If landlords choose to sell properties rather than operate at a loss, or if institutional players selectively buy up distressed assets, the rental landscape could shift yet again in the years ahead.
Looking Ahead
Forecasts suggest that mortgage rates could stabilize later in 2026, potentially relieving some debt pressure for buyers and investors. Meanwhile, rental supply growth is expected to slow, which could help rents bottom out and eventually resume moderate growth.
Still, for the near term, many Colorado landlords find themselves navigating a tricky intersection of high financing costs and a rental market no longer robust enough to absorb every cost increase, a reality that’s reshaping investment strategies across the state.
