A Snapshot of Colorado’s Real Estate Markets
Where Prices Are Growing, Where They’re Shrinking – and Why
Baird in ColoradoThere’s no doubt that the Colorado real estate market has shown signs of cooling off in 2023, after a post-pandemic surge in prices. For the 12-month period from May 2022 to May 2023, home prices in Denver were down 2.0%, selling for a median price of around $600,000. On average, homes in Denver sold after eight days on the market, which may not sound like a lot, but that’s down from five days on the market in the same time frame last year. For homebuyers or investors seeking a second home in Colorado, that’s good news. But other parts of the state tell a different story.
Commentary from Baird’s Real Estate Investment Banking Group regarding the multi-family/rental market, combined with publicly available housing prices, show a divergent market in Colorado based on where you’re looking. There are also divergences based on the type of housing you’re looking to invest in: One area of real estate that remains strong in Denver is the rental market, according to the Apartment Association of Metro Denver, even as home prices have stagnated.
If Denver has been in a mild slump recently, where have prices in Colorado been growing? According to the real estate website Redfin, these are the metro areas in Colorado with the fastest growing home sales prices from May 2022 to May 2023:
- Golden, up 24.3%
- Black Forest, up 12.9%
- Durango, up 8.0%
- Greenwood Village, up 4.6%
- Canon City, up 4.4%
- Wheat Ridge, up 4.0%
- Montrose, up 3.8%
- Windsor, up 2.3%
- Fruita, up 1.4%
- Cimarron Hills, up 1.2%
That list includes several towns on the fringes of the Denver and Colorado Springs metro areas, as well as a few cities on the Western Slope. What do you not see on that list? That’s right: ski towns. Investors looking for rental property or homeowners seeking a vacation home may find this an advantageous time to make a purchase.
For that same 12-month period, May 2022 to May 2023, home prices in Summit County – site of Breckenridge, Keystone, Frisco, et al. – were down by a whopping 15.0%. There were only 227 closed transactions in the entire county during the first quarter of 2023, compared to 278 closed sales during the first quarter of 2022. That’s an 18% reduction in sales on a year-over-year basis, and a 25% drop in dollar volume. This was the first time since the beginning of the COVID-19 pandemic that the average home sale price in Summit County declined.
Nevertheless, homes in Summit County were still selling for a median price of nearly $1 million over this time period. Single-family homes sold for an average of just over $2.14 million, a 15% decrease from the previous year, while condos sold for an average of $813,365, an 8% increase.
Reasons for the Slump
What has caused this slowdown? One reason has to do with an oversupply of homes. As of March 2023, the real estate firm RE/MAX reported that there were more than 260 home listings in Summit County, a 120% increase from the same time a year earlier. Of those listings, 27% are newly constructed homes.
And of course, housing starts in resort towns continue apace. To take one example, Kindred Resorts has begun construction on a massive new ski village at the base of Keystone, with 95 one- to four-bedroom condos and a 107-room ski-in, ski-out hotel.
The same factor may be holding back home prices in the city of Denver. According to a report from StorageCafe, Denver had the 9th-highest rate of real estate construction over the past decade of all American large cities, including roughly 17,900 building permits for single-family homes and 58,000 multifamily units over the same period.
Job growth of course plays a big part in real estate prices and may be another reason why Denver prices have been sluggish. A recent update from Baird’s Real Estate Group titled “The Latest on the Multifamily Real Estate Sector” noted that job growth in the Denver area, though still increasing, has been lagging behind Sunbelt cities like Dallas, Orlando and Nashville. Overall, Colorado’s job growth was 0.8% from April 2022 to April 2023, compared to an overall U.S. job growth rate of 2.6%.
One area that has retained its growth is the apartment market, due to a modest uptick in job growth for the primary renter cohort, defined as those age 25-34 years old. The average rent in metro Denver rose slightly from $1,846 in the first quarter to $1,878 in the second, according to a report from the Apartment Association of Metro Denver.
Markets for Growth
Where has Colorado been growing? According to the U.S. Census, Colorado’s smaller cities and towns saw the most growth from 2020 to 2022, while the state’s largest cities and ski towns saw stable or even declining populations. The city showing the most population growth was Keenesburg, about 40 miles northeast of Denver in Weld County, which went from 1,258 in 2020 to 2,080 in 2022. Second was Timnath, just southeast of Fort Collins along I-25, which added 2,600 people.
The major cities all treaded water during this period: Denver was down by just under 1% over the two years, Colorado Springs was up 1.2%, and Boulder dropped by 2.4%. Several mountain towns, including Vail and Aspen, were among the biggest population losers between 2020 and 2022, percentage-wise. Aspen was at 6,871 in 2022, down from 6,998 in 2020; Vail was at 4,581 in 2022, down from 4,814 in 2020.
That seems to be one key aspect of housing price fluctuations that applies as much to Colorado as anywhere else: Areas with sufficient housing supply that aren’t seeing increases in population are likely to see prices stay flat. But cities like Fruita and Montrose and Golden, which haven’t been as thoroughly developed, are more likely to see prices rise.
That appears to be the formula to watch for in Colorado’s real estate market in the coming years: For appreciating prices, look to areas where the population is growing but building has not kept pace. On the other hand, prices will tend to decline where there is plenty of housing but not much growth. It may be counterintuitive, but as far as price growth goes, this is one area in which Keenesburg can be said to have an edge over Vail.
At Baird, we keep a close eye on these trends for our clients, whether they’re real estate investors or just someone looking to buy a ski condo for their family. We are a fully-fledged financial services firm with a focus on integrity, transparency, and, most of all, keeping clients first. In addition to our well-known Private Wealth Management services, Baird Business Owner Solutions advises small companies and their owners on business transition, valuation and M&A transactions, and the Baird’s Real Estate Investment Banking team has an established track record of providing clients with comprehensive strategic advisory and capital market services. If we can help you navigate the Colorado real estate market, or with any other aspect of your financial situation, feel free to give us a call.