Home prices in the Colorado Housing Market are surging. On virtually every real estate website such as Zillow and Trulia Denver, Boulder, and Colorado Springs real estate ranks high among the hottest housing markets in the country. After the first quarter of 2016, Denver real estate (always a top market in sales and price appreciation) ranked 3rd, Colorado Springs 11th, and Boulder 18th. Colorado has more cities in the top 20, second only to California.
This ranking includes the number of views for home listings, home value appreciation, and the speed in which the listings sell. For example, Realtor.com shows that the median length of time in which a home is listed in Denver metro dropped to 36 days in March from 45 days in February (the median listing period nationally was 77 days in March), and on Zillow Denver is reported to have had a 15.3% increase in its Home Value index in the past year. And just as home values are increasing so are the rental prices. Of those renting, 34% of their income is spent on their rent. This is compared to 24% in 2008. Like other markets the low inventory will continue to be a problem for Colorado real estate, but the biggest issue that the state’s 2016 Housing Market faces is affordability.
California has been battling with this issue for the past few years and as a result residents have left the state for more cost-friendly options. Housing markets like the Denver metro area must find a solution to the housing affordability issue or run the risk of losing a new generation of first-time homebuyers to markets with a lower cost of living. Since 2010 one third of new residents to the Denver housing market were buyers between the ages of 18 to 34 years old. Recently the Governor of Colorado John Hickenlooper spoke about the issue.
Check out the 2015 Colorado Housing Market Predictions to Compare This Year Forecast to Last Year
“Long term, if we can’t figure out how to get more affordable housing, especially more condos, available, people will come here, they’ll work for a few years, they’ll begin their career here, and then when they decide they want to make that investment, they’ll end up moving back to Indianapolis or Austin,” says Hickenlooper. One solution that the governor proposes is to reform the state’s construction defects law. The law has caused many builders to be hesitant about moving forward with condominium projects, and in turn has caused insurance companies to jack up rates for the builders. This increase in cost is passed on to the buyer, making it harder for families searching for a starter home. Last year only 3.4% of single-family home constructions in Denver metro were condos, compared to 25% in 2006.
The Colorado housing market needs to find a way to have enough housing for everyone, including people who are currently renting and want to become homeowners. If not they risk losing young, talented people who cannot afford to raise a family in the state.
Influencing Factors for the 2016 Colorado Housing Market
- The Zillow Home Value Index has the median home value in Colorado at $298,500. This is a 13% increase in the past year, and housing market predictions have this value increasing another 4.2% over the next year.
- Colorado’s low foreclosure rate is a big positive in terms of market health. Foreclosures impact home values in their respective markets. The foreclosure rate in Colorado is 1.1 homes per 10,000. This is much lower than the national average of 3.1 per 10,000 homes.
- Average rental prices for the state are $1,782 (the national average is $1,388). Metro area rentals tend to be between $2-3,000. Denver is currently a majority renter-occupied city, with nearly 52% of households renting. The median rental price in the city is $1,959, and a look on Craigslist Denver shows that single family homes are renting for nearly $3,000.
- Impending interest rate hikes are expected to rise to between 4.5-5% by years end. This will make it even harder for first time homebuyers to enter the market.
- More affordable housing must be erected in order to keep up with the demand and to not deter homebuyers to seek real estate ownership in another state. The current high demand/low supply situation in Colorado keeps driving home values up. This runs the risk of eliminating middle and lower class residents from finding affordable housing options.
Best Places to Live in Colorado
Denver is predicted to be the number one market in the country this year and it’s getting a lot of help from the Aurora neighborhood real estate market. Aurora’s median home value has skyrocketed recently and is now $250,700. This is an 18.6% increase in the past year and it is expected to rise another 8%. More impressive is that this value has increased over $100,000 in four years. The popularity of Aurora is due to home value appreciation, low unemployment rates, and strong income growth, but mainly it is because the market is affordable. The fact that Aurora connects to the new commuter train to downtown Denver and the Denver International Airport is attractive as well.
The Boulder CO real estate market was in the top 1% of the country’s most expensive housing markets last year, but this hasn’t slowed down sales. In March of this year Boulder saw the median listing age drop from 48 days to 40. The median home value is $640,900, but for a 4-bedroom home in the city the average listing price is over $1 million. Along with high home values the average rental cost is also extremely high at $2,610. Part of the reason for the high cost of living is that the city lacks the land to build new larger single-family homes, and planners have had to resort to denser multi-family development. Those looking to buy in Boulder will continue to see homes selling quickly, and for more than the asking price due to competition. Pretty soon Boulder could be on par with Aspen real estate, which is littered with prime luxury homes that carry a median home value of $1,545,700.
A little more affordable than Boulder, Fort Collins real estate has a median home value of $323,800. This is a 13.3% increase in the last year, and the average rental price in the city is $1,774. Fort Collins has been hit hard due to the construction defects law that went into effect in 2007. Because of the rising cost of scarce land in the city the price that builders can offer is on the higher end. Now only 3% of home starts are condos, which are a traditional entry point for buyers looking into home ownership. But if you can afford it Fort Collins provides great investment upside. Economists predict that the region’s home prices over the next 10 years will increase around 5.5% a year. This would result in the average home price in Fort Collins to be $550,000 by 2026. However, this is also contingent on continued wage growth, and sustaining the current population trends.
For those looking for more affordable housing markets, the real estate in Pueblo is a great option. Located just to the south of Colorado Springs, median home values here run around $121,400. And for a 4-bedroom home, listings are averaging $151,700, a far cry from the $1 million dollar price tag of the same home in Boulder. And just like the low price in homes, the average rental prices are a fraction of what they are in the rest of the state. Pueblo rentals average around $1,050, nearly $700 less than the state average. Another market to keep an eye on for its affordability factor is Monte Vista, where the average 4-bedroom home is listed for $177,947.
Along the western border of the state is another cost-friendly market in Grand Junction, with median home values around $190,200. The big risk for the Gran Junction area is the hit to the natural gas, oil, and coal prices, as employment issues must be taken into consideration. But other major contributors to the economy (health care, tourism, agriculture, and livestock) are strong enough industries to sustain the regions employment. With its location along the Colorado River and close proximity to a series of canyons and mesas, Grand Junction has become a popular destination for outdoor enthusiasts.