I have lived in Northern Colorado Since 1979. I have been a real estate agent since 2001 and my father has been an agent since 1978. Since my father and I have been involved in real estate, we have never had prices increase as fast as they have the last few years. The front range has had one of the hottest real estate markets in the country. Prices in Denver, Boulder, Fort Collins, Colorado Springs, Greeley and many more towns have increases over 10 percent a year. While current homeowners love to see the prices increasing, it can make it tough for people to afford to buy homes. What is making prices increase so much?
How much have housing prices increased in Colorado?
The median home value in Colorado is now $294,000 according to Zillow. That is up 12.7 percent in the last year. Colorado did see a drop in values after the housing crisis, but the current values are well above the highs before the housing crisis. In 2007 the median value in Colorado was about $230,000 and that dropped to about $200,000 in 2012. Since 2012, prices have skyrocketed in the Colorado increasing by 47 percent in a little over three years. I am located in Greeley Colorado, which has been one of the more affordable locations along the front range, and our prices have skyrocketed as well. The median price in Greeley has gone from $125,000 to well over $200,000 in three years.
What is pushing the housing price increase in Colorado?
There are many factors that are driving housing prices up in Colorado.
- Colorado’s population has been increasing steadily for decades.
- There were very few homes built during the housing crisis.
- Colorado has a very strong economy.
- The cost to build in Colorado is relatively high.
- It is very difficult to develop condos or town homes in Colorado.
How much has the population increased in Colorado?
Colorado’s population has steadily increased since it became a state in 1876. Here are some interesting stats from 2015.
“Colorado’s population reached 5,456,574 as of July 1, up from 5,355,588 the same day a year earlier, according to updated estimates released by the U.S. Census Bureau on Tuesday.
The 1.89 percent increase was more than double the 0.79 percent increase in the overall U.S. population and second only to North Dakota, which added 16,887 people for a 2.28 percent gain.”
Why were no homes built in Colorado during the housing crisis?
Colorado did not suffer a huge decrease in housing prices like some areas of the country did. However, Colorado still saw a 20 percent decrease in housing prices across the state. From about 2007 to 2013, there was very little if any building. There were plenty of foreclosures that home buyers could purchase, and prices for homes was much lower than what you could build for. While the housing market was stagnant there were still many people moving into the state. With high foreclosure inventory, there was no need for houses to be built.
Around 2012, the foreclosure inventory started to dry up. There were fewer and fewer houses on the market and prices started to increase. People kept moving in, but there was still very little building going on. I think many builders were worried there may be another recession, and it was harder for builders to get financing after lending guidelines were changed.
Another big factor in Colorado is legislation that was passed on condos and town homes that makes it easier for homeowners to sue builders for construction defects. There is a lot of controversy about the legislation, but it has resulted in much fewer condos and town homes being built in the state. Condos and town homes are typically less expensive than single family homes. With less of condos and town homes, prices have increased even higher and lower priced options.
“According to a report from Patricia Silverstein, chief economist with Development Research Partners in Jefferson County, only 3.4 percent of single-family home starts in metro Denver in 2015 were condos. Nine years ago, that share was 25 percent.”
Why is the cost to build in Colorado high?
Another factor that affects housing prices is how much it costs to build a home. In Greeley, which has some of the cheaper new constructions homes, entry-level is around $250,000. Ten years ago when there was much more building going on, the entry-level new homes were about $170,000. The cost of building has gone up for a number of reasons.
- Building materials are more expensive
- Cost of land is more expensive
- City’s have increased the costs for permits
- Utilities and water have become more expensive
- Labor is more expensive
The only way to increase the amount of houses, is to build more. If housing inventory is low and the median price of homes is well below what it costs to build new houses, than the only place prices can go is up.
There are a number of factors that have caused Colorado’s housing prices to increase at one of the fastest paces in the country. The economy is strong, housing inventory is low, very few condos or town homes are being built, and people keep moving into the state. I cannot predict what housing prices will do in the future, but I do not see a big downturn int he state anytime soon.