Learn more about the housing market in Colorado

Every state is unique when it comes to the real estate market. That’s why it’s critical to understand the market you live or operate in. Whether you’re renting, buying, or selling, it will impact many aspects of your life.  

Colorado Housing Market Overview 

Colorado is a popular western U.S. destination for travelers, investors, and homeowners.  

The state boasts a robust economy and a variety of natural attractions, including deserts, vibrant canyons, and ski resorts along the snow-capped Rocky Mountains. Mountain resort towns in Steamboat Springs, Craig, Edwards, and other towns attract thousands of outdoor enthusiasts each year, while Front Range cities like Denver, Fort Collins, Sterling, and Boulder present dynamic communities and stable opportunities for investors. 

Colorado’s housing market has seen much movement and speculation in recent months. In many ways, Colorado’s market struggles with the same concerns as the rest of the U.S.: High prices, high interest rates, and low inventory. Housing scarcity in Colorado has created a seller’s market, with almost 30% of homes in Colorado selling above list price in April of 2024 due to low inventory. Home prices have also increased by more than 40% in Colorado over the previous five years. 

Additionally, Colorado faces major barriers to affordable housing, up to par with markets like Florida and California. Due to lagging construction, rising demand, and increased short-term rental activity, homes are unaffordable for many Colorado residents who would otherwise be homeowners already. 

It’s not all bad news for Colorado buyers, however. Recent reports have indicated that some inventory may be freed up soon by those in the Baby Boomer generation looking to downsize. Although home prices will likely continue to rise until the supply balances, if interest rates are eased, buyers will resume activity in the market as well. 

Colorado’s local governments are taking measures to ease unaffordability, too. In the past, Colorado has struggled with restrictive zoning laws preventing affordable home construction. On May 13, 2024, Governer Jared Polis signed a bill requiring local governments to prioritize new housing near transit hubs. The bill encourages apartment and condo zoning near public transit in addition to more accessory dwelling units. The hoped-for result of this bill is to increase housing diversity and create more housing in general at a lower price point. Allowing developers to increase construction will hopefully increase supply, ease prices, and help affordability in the state. The transit-oriented nature of this bill is also beneficial for the state’s climate impact and carbon footprint by incentivizing public transit. 

Overall, Colorado seems to be 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.  

Colorado Housing Market Trends 

To understand the Colorado real estate market, it’s important to keep up with trends. Let’s look at some key ones in the housing market Colorado currently has. 

Note: These statistics are based on Redfin’s monthly housing data from April 2024. 

Median Sales Price of Homes 

The median sale price in Colorado as of April 2024 was $621,800, a 7.4% increase year-over-year. This places Colorado’s prices on the higher side, as one of the more expensive states to live in the U.S. Rising prices, interest rates, and buyer demand in the state have led to a continued unaffordability crisis in Colorado. 

Number of Homes Sold in April 2024 

In April of this year, 6,805 homes were sold in Colorado, up 4.7% since last year. This metric gives us a good picture of the current sales volume in Colorado. However, keep in mind that this number might be inflated compared to other months since nationally speaking, sales usually peak during the spring and summer months and slow in the winter. In fact, the National Association of Realtors (NAR) predicts that in February and March alone, sales activity increases by as much as 34% and prices by 3%. 

Median Days on Market (DOM) 

Days on market (DOM) is a measure of the average length of time a home remains listed on the market before being put under contract. A lower DOM signals a highly competitive seller’s market with more pressure on buyers to make higher offers and remove contingencies. A higher DOM signals a buyer’s market as sales are slower and sellers have less leverage. 

The current median days on market (DOM) in Colorado is 25 days, meaning that homes sell in 25 days after being listed, on average. Colorado’s current DOM is relatively low compared to other states, indicating a competitive seller’s market. 

New Supply Statistics 

Housing supply in Colorado is increasing, which could lead to more housing opportunities and ease the financial burden of renters and homeowners in the state. On average, there were about 9.73 new residential construction permits per 1,000 people in Colorado in 2021. Movement based on demographic, employment, and climate trends may influence new construction in Colorado in coming years. 

Property Tax Rate 

The average property tax rate in Colorado is 0.55%, according to Rocket Mortgage. This places Colorado’s average property tax rate as the 3rd lowest in the U.S. However, keep in mind that property taxes vary widely depending on the specific county of Colorado and the value of the home. 

Foreclosure Rate in Q1 of 2024 

In the first quarter of 2024, 1 in every 2,706 homes in Colorado experienced a foreclosure filing (according to recent data from ATTOM). Based on this data, Colorado’s foreclosure rate is below average compared to other states. 

Hottest Local Markets in Colorado 

Below are a few of the hottest local markets to keep an eye on in Colorado in 2024. 

1. Denver Metro Area

Colorado’s capital is also its most populous city and most prosperous real estate market. A recent article from the U.S. News and World Report ranked Denver as the hottest housing market in the country with a Housing Market Index total of 74.8. Several strengths are responsible for Denver’s success, including low unemployment, low mortgage delinquencies, high occupancy rates for rentals, and increased construction. As new listings in Denver continue to grow, buyers are taking advantage of them, fueling even more market growth.  

2. Grand Junction

Grand Junction is another promising market in Colorado. This city saw substantial migration from states like California, Texas, and Washington during the COVID-19 pandemic, as more homeowners sought rural havens to work remotely. According to Rocket Homes, the median listing price for homes in Grand Junction is currently $530,000. About 37% more homes are for sale in Grand Junction, CO in May of 2024 than there was just a month previously, and DOM is correspondingly decreasing as more homeowners are jumping in the market. 

3. Greeley

Greeley is another hot seller’s market, with homes selling for a median price of $435,000 in April of 2024. Like Grand Junction, listings are up and more homes are for sale in Greeley come the spring and summer months, leading to a dynamic market to watch for the summer. 

4. Colorado Springs

South of Denver, the Colorado Springs housing market is another competitive market, with a median listing price of $455K. Homes here currently sell in just over a month on average, and almost a third of them do so for above listing price. 

Economic Factors Impacting the Colorado Housing Market 

A holistic view of Colorado’s housing market requires a basic understanding of the main economic drivers affecting the market. Let’s look at a few critical ones below: 

Mortgage Rates 

High mortgage rates are a continuing challenge for would-be homeowners in the U.S. Colorado’s average rate for 30-year fixed-year mortgages as of the day this article was written is 7.34%, slightly higher than the national average. Higher interest rates deter borrowing and discourage those who already own homes from putting their homes on the market. Many homeowners report feeling “locked in” to their current homes, as it is unlikely they will secure a mortgage rate as low as their current one on their next property. Prospective buyers in Colorado should monitor mortgage rates in the coming months for a better understanding of how they impact the housing market. 

Inflation and Cost of Living 

Mortgage rates are tied to inflation, another massive contributing factor to the affordability of housing and the state of housing markets in general. Inflation has increased the cost of living for many across the U.S., including in Colorado. This means fewer people can truly afford to limit housing costs to less than 30% of their monthly income. 

Population Changes and Demographics 

Population movement, job growth, and intraregional migration also affect the housing market in Colorado. Although Colorado’s rate of population growth is dropping compared to the previous decade, the state is nonetheless the preferred destination for many homeowners moving from the nation’s most expensive cities. Migration to Denver primarily comes from Houston, TX; San Francisco, CA; and Los Angeles, CA. However, Colorado’s overall outflow in 2022 was higher than their number of new residents. 

Other Factors for Colorado: Insurance Costs 

Colorado faces another challenge: Natural hazards, specifically wildfires and hailstorms, are increasingly driving up homeowners’ insurance costs.  

According to the Colorado State Forest Service, one million Coloradans (just under half the state’s population) live in an area with a heightened risk of wildfire. Equally as devastating are the state’s hailstorms, such as this fatal storm that recently struck Greeley. 

These increased environmental risks come with increased concern for both homeowners and insurers. The Colorado Division of Insurance reported that Colorado had the 4th highest losses in the U.S. for five years in 2023. Likewise, homeowners’ insurance premiums in Colorado have increased between 30-130% in the past few years (compare this to the average premium increase across the U.S. last year, which was 11.3%). Some companies in Colorado are refusing to write new policies for areas with high wildfire risk, leaving homeowners with mortgages no choice but to pursue more expensive nonstandard options.  

Insurance costs will continue to be a challenge as more natural disasters and other climate events impact Colorado’s markets. 

Colorado Housing Market Predictions 2024 

As mentioned above, Colorado seems to be shifting to a more balanced market in the second half of 2024. While we may not see a full shift to a buyer’s market again in the state, there will likely be more opportunities for buyers coming to Colorado in the rest of the year. 

New listings in April and May of this year have invigorated Colorado’s housing markets, increasing opportunities and inventory for buyers. This means there may be fewer intense bidding wars and more available housing to suit everyone’s needs. 

And although home prices have continued to increase in recent months, their rate of increase in Colorado has slowed. Some experts predict this is a sign that the market may be stabilizing. 

Prospective buyers and investors in Colorado should watch for inventory, prices, and mortgage rates to reach an ideal balance that may mean buying in Colorado is a good option in the coming months and beyond. 

Likelihood of Colorado Housing Market Crash  

A housing market crash in Colorado is unlikely soon. The state’s strong job market, low unemployment rate, and increasing private-sector employment leads to a strong, sustainable housing market. Colorado’s market continues to grow and attract homeowners looking forward to the state’s unique natural and employment offerings. 

These factors and others will continue to affect the Colorado market, which investors and analysts will keep monitoring to track both national and regional trends impacting the region. 

Forecast for The U.S. Housing Market 

Now that we’ve looked at Colorado’s housing market, let’s zoom out a little bit. What about the U.S. housing market? What do you need to keep an eye on in the coming years? 

The United States’s current median existing-home sale price is around $384,500 per the National Association of Realtors. The inventory, though, remains low. A balanced market typically has a 5-to-6-month supply, but the current figure is 2.9. 

We’re currently in a seller’s market with buyers looking at continued rising house prices. The same trend can be seen with renters. Housing continues to appreciate, in general.  

Dr. Lawrence Yun, Chief Economist and Senior Vice President of Research, National Association of Realtors, believes the housing market will appreciate 15 to 25% over the next five years. He thinks that the seller’s market will continue because housing inventory will remain low. In five years, however, he predicts a more balanced market, in which neither party has a built-in advantage. Thus, the market will shift to a case-by-case basis to determine what kinds of deals people can get. 

Hybrid work also impacts the housing market. This shift in work culture means suburbia will continue to grow. States like Texas, the Carolinas, Tennessee, and Florida should see continual growth. 

The number of single-family homes built decreased over the past couple years while the number of multi-family homes increased due to lower prices and a demand for affordable housing. Higher mortgage rates and inflation (affecting price of materials) were the main causes.  

Lower income households continue to struggle in the current housing market. This trend appears likely to continue into the foreseeable future. Without enhanced supply or helpful subsidies, the outlook is that many Americans will still wrestle with housing affordability in the years to come.  

Colorado Rental Market 

The rental and buying market are obviously closely linked. When home prices fall, landlords are more likely to buy properties to rent out. Home prices and rental prices are correlated as well because a hot market means prices rise.  

Rents were more unaffordable than ever in 2021 and 2022. In 2022, 22.4 million households paying rent said it was unaffordable, which is the highest that figure has ever been, according to a January report from the Joint Center for Housing Studies at Harvard University. The study found that half of all renters in the United States spent over 30% of their income on rent and utilities.  

The markets cooled in 2023, though, due to new units and decelerating demand. But a serious problem persists: Rent increases are still outpacing income gains.  

Moreover, high interest rates are keeping borrowing and transaction activity down. Over half the banks surveyed by the Federal Reserve reported that demand for multifamily loans decreased year-over-year. 

The pandemic caused a housing disparity that isn’t going away anytime soon. Unaffordable housing is a serious issue across America. Whether high rents or low income is the main cause doesn’t change the fact that this problem is widespread.  

This short summary leads directly into Colorado’s current rental market, with key trends from Zillow:

Colorado Rental Market Key Trends 

• Median rent: $2,294 

• Month-over-month rent change: +$19

• Year-over-year rent change: +$18

• Available rentals: 12,593

Conclusion 

The Colorado housing market in 2024 is marked by promising insights for buyers as well as increasing environmental challenges, making it crucial for potential buyers and sellers to stay informed about market trends. Whether you’re looking to purchase a home soon or sell your property in Colorado, the macro- and micro- economic trends outlined above will affect your decision-making. Market dynamics like changes in home prices, inventory levels, and interest rates will continue to be critical for stakeholders in Colorado real estate.