"Market Moods" and the Colorado state flag
Illustration by Lanette Behiry/Real Estate News

Market Moods: Is Colorado in line for a slowdown? 

Supply hasn’t kept pace with population growth, driving up prices for starter homes — and pushing first-time buyers out of the market.

February 14, 2024
4 minutes

Key points:

  • Single-family home sales in Colorado were down nearly 7% year-over-year in December.
  • Limited supply, particularly when it comes to affordable starter homes, is constraining sales.
  • But building permits are on the rise in some fast-growing areas, which could help relieve pressure in the longer term.

A lack of starter homes and accelerating home prices could cause Colorado's real estate market to see a sharp decline in transactions in 2024.

That drop-off could happen at a time when some cities are issuing more building permits than in previous years to combat Colorado's housing affordability challenges, said Cooper Thayer, a broker and member of the Colorado Association of Realtors' legislative policy committee.

According to CAR's latest monthly data, there were just 2,453 single-family listings sold in December 2023, which represents a decline of roughly 6.8% since December 2022. Townhomes and condo sales also fell by roughly 3.8%, or about 36 sales.

"Colorado Realtors have to work a lot harder to sell homes now," Thayer told Real Estate News. "With less inventory on the market and buyers realizing they've got a little bit more power now that their interest rates are coming down, there's just going to be a lot more negotiation."

Starter homes remain in low supply

One of the main factors constraining the Colorado market is a lack of starter homes — which, for the Denver area, generally applies to listings under $500,000, Thayer said.

The number of starter homes statewide has declined from about 25% of the market in 2021 to below 6% of inventory as of 2023, he added.

That decline has put upward price pressure on hot markets in the Denver metro area like Wheat Ridge, Morrison and Golden. All these markets have median home prices above the metro area median price, according to CAR data.

"The constraint on inventory is not going away whatsoever," Thayer said. "We are absolutely going to remain in a housing shortage where we've got more buyers than we have sellers."

In-migration adds to the stress

Colorado's housing affordability challenges and the lack of available starter homes hasn't stopped people from moving to the state.

Since 2020, Colorado has welcomed nearly 200,000 new residents to the state, according to census data. As of 2023, the state's total population was just over 5.8 million. Thayer said the population could reach 5.95 million by the end of 2024 if the trend continues.

Suburban cities like Broomfield and Aurora have largely benefitted from this migration, Thayer said. One reason is that major employers like internet service provider CenturyLink and Vail Resorts have moved out of downtown and into the suburbs, bringing a lot of their employees with them, he added.

Over the past year, Broomfield has seen its share of employed people spike by 4.2%, which Thayer said was one of the highest rates in the Denver metro area. The city has also seen its population grow by roughly 33% since 2010, which has caused property values to increase significantly as well.

Broomfield's median home price stood at $721,000 as of December 2023 compared to the $593,000 median price achieved in Denver, which is just 30 minutes south.

More development on the way?

A piece of good news for Colorado's market is that some cities seem poised for a development boom in the near future.

Aurora is a prime example. In 2022, the city issued just over 16,000 building permits for single-family homes. That total increased to nearly 23,000 by 2023, which represents a climb of 39.8% year-over-year. New construction accounts for roughly 25% of all inventory in Aurora, Thayer said.

However, selling the new inventory will be dependent on how interest rates move, Thayer cautioned. The Federal Reserve seems poised to hold steady on their benchmark interest rates when they meet again in March. Any decline in interest rates could result in increased buyer activity, Thayer said.

"Agents have to be more diligent in their marketing efforts when selling homes, and they have to be very well informed and able to provide good advice to their buyer," Thayer said.

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