There are differences between states when it comes to the real estate market. Because of this, it’s crucial to understand our market. The decision to rent, buy, or sell will affect a number of aspects of your life.
A summary of the Colorado housing market
The western U.S. state of Colorado is a popular tourist, investor, and homebuyer destination.
As a result of the state’s robust economy as well as numerous natural attractions, including deserts, vibrant canyons, and ski resorts along the snow-capped Rocky Mountains, it has a variety of natural attractions. In Steamboat Springs, Craig, Edwards, and other mountain resort towns, customers from all over the country come to enjoy the outdoors, while Front Range cities such as Denver, Fort Collins, Sterling, and Boulder offer investors stable investments.
There has been a lot of movement and speculation in Colorado’s housing market over the past few months. The Colorado housing market faces many of the same challenges as the rest of the country: high prices, high interest rates, and low inventory. Low inventory has created a seller’s market in Colorado, with almost 30% of homes in the state selling above list price in April of 2024. Colorado’s home prices have also increased by more than 40% over the last five years.
A major barrier to affordable housing exists in Colorado, just as in markets such as Florida and California. Home prices are unaffordable for many Colorado residents who would otherwise be homeowners due to lagging construction, rising demand, and an increase in short-term rental activity.
There is some good news, however, for Colorado buyers. There are reports that some inventory may become available in the near future as Baby Boomers downsize. Despite rising home prices, buyers will return to the market if interest rates are lowered.
There are also efforts being made by Colorado’s local governments to reduce the cost of living. Home construction has been hindered in the past by Colorado’s restrictive zoning laws. Governor Jared Polis signed a bill mandating new housing near transit hubs on May 13, 2024. In addition to increasing accessory dwelling units, the bill encourages apartment and condo zoning near public transportation. As a result of this bill, it is hoped that housing diversity will increase and that more housing will be produced at a lower price. Developers are allowed to increase construction to ease prices, increase supply, and improve affordability. Additionally, by incentivizing public transit, the transit-oriented nature of this bill benefits the state’s climate impact and carbon footprint.
It appears that Colorado’s economy is shifting towards a more balanced market in 2024. New listings in April and May of this year have increased inventory, and hope, for prospective homeowners. We may not see a full shift to a buyer’s market, but there will certainly be more opportunities for buyers coming to Colorado in the coming months.
Trends in Colorado’s housing market
Understanding Colorado’s real estate market requires keeping up with trends. In the current Colorado housing market, let’s review some of the most important ones.
According to Redfin’s April 2024 housing data, these statistics reflect the housing market.
Home sales prices on a median basis
As of April 2024, the median sale price in Colorado was $621,800, a 7.4% increase from the previous year. As a result, Colorado’s prices are expensive, making it one of the most expensive states to live in. Colorado’s unaffordability crisis has been exacerbated by rising prices, interest rates, and buyer demand.
Home sales in April 2024
A total of 6,805 homes were sold in Colorado in April, an increase of 4.7% over last year. The metric gives us a good idea of Colorado’s current sales volume. Nevertheless, this number might be overstated when compared to other months, since sales usually peak in the spring and summer months and decline in the winter. A further 3% increase in prices and 34% increase in sales activity are predicted by the National Association of Realtors (NAR) in February and March alone.
The average number of days a product is on the market (DOM)
An average number of days a house remains on the market before being under contract is called the days on market (DOM). In a high-competition seller’s market, the DOM is lower, indicating higher offer levels and less contingencies for buyers. There is less leverage for sellers in a buyer’s market with a higher DOM.
A Colorado home sells in 25 days on average after it is listed, according to current days on market (DOM) statistics. Due to Colorado’s low DOM, a seller’s market is prevalent.
Statistical Update on Supply
As the supply of housing in Colorado increases, more housing opportunities will be available, easing the financial burden on Colorado’s renters and homeowners. According to the Colorado Department of Public Health and Environment, the number of residential construction permits per 1,000 people in 2021 was about 9.73. Changing demographics, employment trends, and climate may influence new construction.
Rate of property taxes
It is estimated that Colorado property taxes are 0.55% on average, according to Rocket Mortgage. As a result, Colorado’s average property tax rate ranks 3rd in the country. You should also keep in mind that property taxes vary widely based on the location of the house and its value in each county.
In the first quarter of 2024, foreclosure rates are expected to be high
Data from ATTOM indicates that one in every 2,706 homes in Colorado experienced foreclosure filings in the first quarter of 2024. Comparing Colorado’s foreclosure rate to other states, it is below average.
Colorado’s most popular local markets
Check out some of Colorado’s hottest local markets for 2024 below.
Denver Metro Area
As Colorado’s capital city and most populous real estate market, it is also its most prosperous. As reported by U.S. Among the hottest housing markets in the country, Denver has a Housing Market Index total of 74.8 according to U.S. News and World Report. As a result of Denver’s low unemployment rate, low mortgage delinquencies, high rental occupancy rates, and increased construction, the city has achieved success. Denver’s market continues to grow as new listings are added, which fuels more buyer interest.
Grand Junction
Colorado’s Grand Junction is another promising market. During the COVID-19 pandemic, more homeowners sought rural havens to work remotely, such as this city. Currently, the median listing price for homes in Grand Junction is $530,000. It is estimated that 37% more homes are on the market in Grand Junction, CO in May of 2024 than there were just a month earlier. The days on market (DOM) is also decreasing as more homeowners jump into the market.
Greeley
Similarly, Greeley is a seller’s market with a median home price of $435,000 in April 2024. Greeley’s home listings are up and more homes are on the market come spring and summer, creating a dynamic market.
Colorado Springs
In Colorado Springs, housing prices are also competitive, with a median listing price of $455K. The average home here sells in less than a month, and almost a third goes for more than its listing price.
Colorado’s Housing Market: Economic Factors
Understanding Colorado’s housing market holistically requires an understanding of the main economic drivers. The following are some of the most critical:
Rates on mortgages
U.S. homebuyers continue to struggle with high mortgage rates. A 30-year fixed-rate mortgage in Colorado is currently 7.34%, slightly higher than the national average. Borrowers are discouraged from borrowing and homeowners are discouraged from selling their homes. There is a high probability you will not be able to obtain a mortgage rate as low as your current one on your next home, so many homeowners report feeling “locked in” to their current properties. The Colorado housing market will be impacted by mortgage rates in the coming months, which prospective home buyers should keep in mind.
A comparison of inflation and living costs
Moreover, mortgage rates are influenced by inflation, another major factor contributing to the affordability of housing. In Colorado, inflation has raised the cost of living for many. Consequently, fewer people can afford to limit housing costs below 30% of their income.
Demographics and change in population
The housing market in Colorado is also affected by population movements, growth in employment, and intraregional migration. Despite Colorado’s declining population growth rate, it remains one of the preferred destinations for homeowners moving from expensive cities. Houston, Texas, San Francisco, California, and Los Angeles, California are the three largest migration sources to Denver. In 2022, Colorado’s outflow exceeded its inflow, however.
Factors affecting Colorado’s economy: Insurance costs
Homeowners’ insurance rates are rising because of natural hazards, such as wildfires and hailstorms.
In Colorado, one million Coloradans (just under half the state’s population) live in wildfire-prone areas. The state’s hailstorms, such as the fatal storm that recently struck Greeley, are equally devastating.
Increasing environmental risks cause insurers and homeowners to be more concerned. According to the Colorado Division of Insurance, Colorado had the fourth highest losses in the U.S. for five years in 2023. In the last few years, Colorado homeowners’ insurance premiums have increased between 30-130% (compared to the average increase across the U.S. last year, which was 11.3%). There are some insurance companies in Colorado that refuse to write new policies for areas with high wildfire risks, forcing homeowners with mortgages to seek more expensive nonstandard options.
Colorado’s markets will continue to be affected by natural disasters and other climate events.
Predictions for Colorado’s housing market in 2024
It appears that Colorado’s market will become more balanced in the second half of 2024, as mentioned above. There are likely to be more opportunities for buyers coming to Colorado in the rest of the year, even though we aren’t likely to see a full shift to a buyer’s market.
As a result of new listings in April and May, Colorado’s housing market has been energized, giving buyers more opportunities and more inventory to choose from. Therefore, there may be fewer intense bidding wars and more housing available to suit everyone’s needs.
However, the rate of home price increases in Colorado has slowed in recent months. The market may be stabilizing, according to some Redfin.
In the coming months and beyond, potential buyers and investors in Colorado should pay attention to inventory, prices, and mortgage rates to reach an ideal balance.
The likelihood of Colorado’s housing market collapsing
Colorado’s housing market is unlikely to crash anytime soon. A strong, sustainable housing market is a result of the state’s strong job market, low unemployment rate, and increasing private sector employment. There is no doubt that Colorado’s market continues to grow and attract homeowners who are looking forward to the state’s unique natural features and employment opportunities.
Colorado’s market will continue to be affected by these factors and others, which investors and analysts will continue to monitor.
U.S. Housing Market Forecast
The housing market in Colorado has been explored, so let’s look at it from a broader perspective now. How is the U.S. housing market doing? In the coming years, what should you keep an eye on?
The median price of an existing home in the United States is currently $384,500, according to the National Association of Realtors. However, inventory remains low. Normally, a balanced market has a supply of five to six months, but the current figure is 2.9 months.
With house prices continuing to rise, we’re in a seller’s market. Renters follow the same trend. In general, housing continues to appreciate.
The National Association of Realtors’ Chief Economist, Lawrence Yun, estimates the housing market will appreciate 15 to 25% over the next five years. Due to a low housing inventory, he expects a seller’s market to continue. According to him, the market will become more balanced within five years, meaning neither party will have an advantage. To determine what kind of deals people can get, the market will shift to a case-by-case basis.
The housing market is also affected by hybrid work. Suburbia will continue to grow due to this shift in work culture. There should be continued growth in states like Texas, the Carolinas, Tennessee, and Florida.
As a result of lower prices and a demand for affordable housing, the number of single-family homes have declined over the past couple of years, while the number of multi-family homes has increased. Inflation (affecting material prices) and higher mortgage rates were the primary causes.
The current housing market continues to be difficult for lower-income households. It appears that this trend will continue for some time to come. As long as there is no increased supply or helpful subsidies, many Americans will continue to struggle with housing affordability.
Market for Colorado rental properties
There is an obvious connection between the rental and buying markets. It is more likely that landlords will purchase rental properties when home prices fall. There is also a correlation between home prices and rental prices since a hot market means prices are going up.
It was more difficult to afford rent in 2021 and 2022 than ever before. According to a January report from Harvard University’s Joint Center for Housing Studies, 22.4 million households paid rent in 2022 and said it was unaffordable. Rent and utilities account for over 30% of the income of half of all American renters.
Although new units and decelerating demand cooled the markets in 2023, the market remained hot in 2024. A serious problem persists: Rent increases continue to outpace income growth.
Furthermore, high interest rates are preventing borrowing and transaction activity. A majority of banks surveyed by the Federal Reserve reported a decline in demand for multifamily loans.
Housing disparities caused by the pandemic will not go away anytime soon. In America, affordable housing is a serious problem. High rents or low incomes don’t change the fact that this is a widespread problem.
Zillow’s brief summary of Colorado’s current rental market includes the following key trends:
- Rent: $2,294 on average
- Rent change: +$19 month-over-month
- Change in rent from one year to the next: $18
- Rentals available: 12,593
Final thoughts
Colorado’s housing market in 2024 is marked by both promising insights and increasing environmental challenges, making it crucial for potential buyers and sellers to stay informed. You’ll need to consider the macro- and micro-economic trends outlined above when buying a home or selling your property in Colorado. Colorado real estate stakeholders will continue to be affected by changes in home prices, inventory levels, and interest rates.
