The Colorado real estate market- like most of the US housing markets- is experiencing changes in trends. From the median sale price to availability on single-family homes- everything has been caught up in a nationwide flux- and sellers face potentially tough decisions in the coming year.
According to the Colorado Association, the asking price of homes has reached record highs in recent times- and came back down again, which begs the question: is there a chance the Colorado housing market could crash?
Here is a complete guide to the Colorado housing market predictions and trends for buyers and sellers.
Current Colorado Housing Market Trends
Overall, the current trends in the Colorado housing market reflect what is happening in most of the country.
Based on economic indicators, it is fair to assume that inflation- and the increased mortgage rates in response- will continue to have a major influence over how the market progresses over the next few months and into next year.
Already, the year-over-year trends in Colorado paint a clear picture for Colorado homebuyers and sellers. Here are the things you need to know.
Median Home Prices
The median sales price for Colorado homes has remained fairly stable over the past couple of years- especially compared to some other states that have seen significant changes recently.
Currently, the median price is just over $558,000- up slightly from the beginning of the year- but -4% year-over-year. Overall, it shows reasonable predictability for the time being.
Average Time Spent On the Market
One of the changes to the Colorado housing market trends recently is the average length of time taken for a house to sell.
In May 2022, homes were spending an average of 16 days on the market- a record low for recent years.
As of March 2023, that number had climbed to 38 days- more than double the low point- and +19 days compared to the same period from the previous year.
Number of Homes Available (Supply)
There is actually an increased number of homes available now in Colorado compared to last year- by almost 8%.
It is not enough of an increase to improve the months of supply (which has not changed)- mainly because the number of year-over-year recent new listings is 20% lower- and has been since the beginning of 2023 (give or take a few percent).
Number of Homes Sold (Demand)
The year-over-year homes sales dropped by 17.4% from March 2022 to March 2023. Numbers are climbing- as they usually do heading into spring- but even the high seasons have seen reduced numbers overall.
It remains to be seen how well high season 2023 will perform, but if the trend from the previous years is something to go by, an overall drop is likely.
There have been fewer foreclosures in Colorado recently. The downward trend is promising and in line with the overall numbers in the US.
A Few Key Colorado Real Estate Market Statistics
- Colorado sits just below the US average sale-to-list price ratio- at 99.1% compared to 99.8. It has dropped more than 5% in the last year.
- 26.1% of house sellers in Colorado in March 2023 dropped their sale price- a significant increase year-over-year, but an improvement compared to the beginning of 2023.
- 29% of houses sold in Colorado in March 2023 sold above market value- marking the third month of steady increase after a dramatic decline through the second half of 2022.
What Factors Influence the Colorado Housing Market?
Like any state, Colorado's housing market is generally influenced by the economy, politics, changing demographics, and tensions.
Above all, these are the two things playing the most influential role in Colorado real estate right now.
Mortgage Interest Rates
It comes as no surprise that rising mortgage rates have a significant impact on the housing market- not just in Colorado- but nationwide.
Higher interest rates make monthly mortgage payments harder to manage. Unfortunately, unless buyers can afford a large down payment, it can make buying a property completely unfeasible.
This has a knock-on effect on sellers- who may choose to hold off on listing until the market is more competitive- or they may have to lower their asking price to find a buyer within the desired timeframe.
Supply and Demand
The second thing that holds a strong influence over the housing market in Colorado is the imbalance of available homes to interested buyers.
Historically, Colorado has always had a shortage of active listings- and despite a general increase in inventory, there is still nowhere near enough to keep up with demand.
What that means is a market that swings in the favor of the seller- who can price higher because a limited supply means more competition. A huge number of new listings would have to become available to create a more balanced market- and that simply does not seem to be on the table.
Do the Experts Expect the Colorado Housing Market to Crash?
In short, there is nothing to suggest an imminent crash in Colorado's housing market. There is a generally stable economy statewide, and the growing population stands to make it all the more robust.
More buyers could, however, make it an even more difficult environment for buyers- and more power to the sellers.
Colorado Housing Market Predictions
Taking these statistics and influencing factors into account, what do the experts predict for the Colorado housing market going forward?
A Cooling Market Overall
To sum it up, the real estate market in Colorado is expected to cool- but not quite freeze over. Home prices may not necessarily drop, but the appreciation could certainly slow down- and the median price could very quickly change if interest rates force sellers to reconsider.
Longer Times Taken to Close Sales
Part of the market slowing is the increased closing times- and closing costs. Despite high demand, buyers are becoming more wary of the threats to the economy- and are taking longer to commit and finalize.
This is certainly something that should be expected going forward- and sellers may have to practice a little patience if they don't want to reduce their home prices.
Lack of Inventory to Support Growing Demand
Colorado's population is growing, and the supply of housing cannot keep up. Experts believe that the likelihood of the state's inventory catching up to the required months of supply is close to impossible at this time.
What does that mean for you? As a seller, it means there are plenty of fish in the sea- but as a potential buyer, it could mean competitive offers and paying a little over the odds.
Favorable Market Conditions for Sellers
Overall, the theme of Colorado's housing market is predicted to stay very much seller-driver- but with some relief for buyers as interest rates threaten to bring home prices tumbling down from their currently precarious position.
Although Colorado is not expected to be hard-hit by mortgage rates, the threat of sudden change looms heavily over people in their decision-making process.
Housing Market Predictions for the US In General
Now that we have covered Colorado- let's take a quick look at how these predictions compare to expectations for the US housing market as a whole.
Mortgage Rates are Expected to Rise Further
Anyone who was hoping that rising rates were rattling to an end has their hopes dashed here- experts say it is not over yet.
Less Affordable Housing- Despite Potentially Decreased Prices
Many states are not left in a position where people could find themselves priced out of buying properties. It is largely due to the increased mortgage rates- which are driving monthly payments so high that people cannot swing it.
There is also the national shortage of houses- creating a competitive buyers' market where the best offer wins.
Some experts believe that sellers will have to drop their prices to have any hope of selling, while others think they could increase them to single out the ideal buyers.
Either way, fewer people being able to afford to buy houses is the expectation in most cases.
Reduced Home Sales Nationwide
All of these factors come together to create the conclusion that the number of houses sold in the US is likely to decrease. Sales have already declined- despite the higher demand.
People simply cannot afford mortgage payments in many places, and sellers don't want to drop their prices. It could lead to people taking their properties off the market completely until things change- or letting it sit for a very long time.
Even in states such as Colorado where demand is high, the actual number of closed sales is expected to decline due to the economic pressures put on families due to inflation.
Life is getting more expensive- with everything from food costs to new houses being hit by inflation and all that comes with it. Colorado has a robust and well-balanced economy- and the real estate market looks likely to survive fairly well, as things stand.
It is definitely the seller's ballgame- at least for now- despite the post-pandemic surge slowing down significantly.
Overall, trends are not overly worrying- and the threat of a real estate market crash in Colorado is not something anyone seems concerned about for now.
Colorado's housing market came hot out of the pandemic and had a great year or two- but now things are beginning to cool. Buyers beware: the power lies with the sellers today- but if some predictions are correct, easier times could lie ahead for Colorado buyers.
What are the most affordable areas for buying properties in Colorado?
One of the interesting things about the real estate market in Colorado is the difference in affordability from place to place. Colorado realtors can help buyers find a county or city that makes sense for their budget.
Trinidad, Grand Junction, Pueblo, and La Junta are some of the most affordable parts of the state- with Colorado Springs also working out reasonably for single-family homes.
On the other hand, Boulder, Avon, and other mountain locations are some of the most expensive. The Denver metro area is one of the more expensive city spots for buyers.
Are Colorado house prices going up or down?
According to Redfin market data, the median sales price of houses in Colorado is much the same as it was a year ago. Prices were a little higher in the first half of 2022 than they are to date in 2023, but the difference is minimal- and the chance of appreciation is very possible.
It is worth noting, however, that more houses are selling below market value- with more than a quarter of properties applying a house drop (on average).
To sum up, house prices are hovering around a similar number- and have been for the last three years. Depending on what expert you ask, they could go either way.