As home prices drop, Colorado’s real estate industry looks to history to understand trends

If you’re house hunting, there are plenty of homes available in Colorado — nearly 10,000 at the end of March, which is up 41.8{7e5ff73c23cd1cd7ac587f9048f78b3ced175b09520fe5fee10055eb3132dce7} from a year ago. 

Prices are a bit lower, too.

If you need a loan to pay for the house, though, that’ll cost more than it would have a year ago. Even so, mortgage loan rates are about where they were in 2008. And that’s roughly two-thirds lower than the peak in the early 1980s.

The way Colorado Realtors see it is that while the for-sale market has slowed significantly and median sale prices have dropped, it’s been worse. Way worse. And now, the market appears to be settling down with the latest inflation report showing prices aren’t rising as fast as before and the Federal Reserve considering a pause on upping interest rates.  (More on that below.)

“The reality is that there’s a bunch of people that need to buy and sell homes. Their life situation changed. That’s a natural thing. It’s not like the world’s come to an end. It’s just slowing down,” said Realtor David S. Anderson, with Re/Max of Pueblo. “And we’re probably getting more to a more neutral market that we haven’t been in since ’19 when you were looking at three to four months on the market.”

Anderson has a point. Just look at the March home sales data from the Colorado Association of Realtors between 2014 and 2023. 

The count of houses sold in March is closer to where it was in 2019 in the seven-county Denver metro area, according to the latest “Market Trends” report from the Colorado Association of Realtors. Statewide, the number of days a house sat on the market before someone bought it was back to the more leisurely pace of 2019 as well. As for inventory? Bidding wars are rarer. Houses are available, though there are fewer for sale now than two years ago. 

In the largest market, median sale prices fell 12.6{7e5ff73c23cd1cd7ac587f9048f78b3ced175b09520fe5fee10055eb3132dce7} to $650,000 in the city of Denver, and that’s kind of a relief for the real estate industry because the frenzy pushed prices up so high, many prospective buyers left disappointed even after offering more than the asking price on multiple properties. 

“It’s like the heavens have opened up and a giant eraser has come down from the sky and is just kind of erasing all of the 2021 and 2022 madness,” said Matthew Leprino, CEO of Denver-based real estate brokerage Remingo. “Yes, prices are decreasing (but) they’re still higher than they were in 2020. And ’21 and ’22 were weird. They were bad. They were really expensive. But we don’t appear to be going into a huge regression. It might just be that we’re bouncing back out.”

The low interest rates in the past couple of years — between 2{7e5ff73c23cd1cd7ac587f9048f78b3ced175b09520fe5fee10055eb3132dce7} and 3{7e5ff73c23cd1cd7ac587f9048f78b3ced175b09520fe5fee10055eb3132dce7} — are gone, with mortgage loan rates at 6.39{7e5ff73c23cd1cd7ac587f9048f78b3ced175b09520fe5fee10055eb3132dce7}, as of Friday, according to Mortgage News Daily. Buying a lower-median-priced home in Denver at today’s higher interest rate is nearly $300 more per month than last year’s higher-priced home at a lower interest rate according to Bankrate’s mortgage calculator. 

“The public has gotten very spoiled thinking they should get a 2{7e5ff73c23cd1cd7ac587f9048f78b3ced175b09520fe5fee10055eb3132dce7} or 3{7e5ff73c23cd1cd7ac587f9048f78b3ced175b09520fe5fee10055eb3132dce7} interest rate. That’s not going to happen again,” Anderson said. “If you get down into 5{7e5ff73c23cd1cd7ac587f9048f78b3ced175b09520fe5fee10055eb3132dce7}, you’re getting a damn good interest rate. And 7{7e5ff73c23cd1cd7ac587f9048f78b3ced175b09520fe5fee10055eb3132dce7} is actually very good.”

Buyers haven’t stopped buying houses in Colorado. 

Sunny Banka, who sells houses in Aurora and Centennial, blamed cold weather for keeping people from home shopping in March. But in April, she’s expecting different results. Shoppers have had a year to get used to higher interest rates. Currently in Aurora, there are 409 single family houses for sale and 418 with pending sales. 

“We are getting bidding wars,” said Banka, who has been a Realtor for 44 years. “A (colleague) put a $550,000 home on the market over the weekend and had 80 showings and 14 offers. It sold for about $30,000 over (the list price).”

The house must be priced right and in a good neighborhood, said Banka, whose clients are split between buyers and sellers. She said she has to educate them about what it takes to be in the housing market today. 

What’s also been helping? Relatives, she said. 

“What I’m seeing is there’s a lot of grandma, grandpa, great aunt money, mom and dad, who are helping with the down payment to help offset those higher interest rates for first-time homebuyers,” she said.

Denver inflation higher than the US

Higher housing, energy and food costs were reasons for the Denver-area’s 5.7{7e5ff73c23cd1cd7ac587f9048f78b3ced175b09520fe5fee10055eb3132dce7} inflation rate increase in March from a year ago. This was higher than the national 5{7e5ff73c23cd1cd7ac587f9048f78b3ced175b09520fe5fee10055eb3132dce7} rate, according to the U.S. Bureau of Labor Statistics, which does not track inflation rates by states. 

The good news for consumers is that this means prices aren’t rising as fast as they were last year. But this also means that consumer prices are still rising, and that’s on top of March 2022’s 9.1{7e5ff73c23cd1cd7ac587f9048f78b3ced175b09520fe5fee10055eb3132dce7} increase. The top items that changed in price last month:

▲▲ Higher ▲▲  

• Nonalcoholic beverages were up 16{7e5ff73c23cd1cd7ac587f9048f78b3ced175b09520fe5fee10055eb3132dce7} 
• Fruits and vegetables, up 14.1{7e5ff73c23cd1cd7ac587f9048f78b3ced175b09520fe5fee10055eb3132dce7} 
• Dairy and related products, up 12.5{7e5ff73c23cd1cd7ac587f9048f78b3ced175b09520fe5fee10055eb3132dce7}
• Rent of primary residence, 10.3{7e5ff73c23cd1cd7ac587f9048f78b3ced175b09520fe5fee10055eb3132dce7}
• Food away from home, up 10.3{7e5ff73c23cd1cd7ac587f9048f78b3ced175b09520fe5fee10055eb3132dce7}
• Owners’ equivalent of rent, up 7.8{7e5ff73c23cd1cd7ac587f9048f78b3ced175b09520fe5fee10055eb3132dce7}

▼▼ Lower ▼▼

• Used cars and trucks, down 11.5{7e5ff73c23cd1cd7ac587f9048f78b3ced175b09520fe5fee10055eb3132dce7}
• Gasoline, all types, down 2{7e5ff73c23cd1cd7ac587f9048f78b3ced175b09520fe5fee10055eb3132dce7}
• Electricity, down 2.9{7e5ff73c23cd1cd7ac587f9048f78b3ced175b09520fe5fee10055eb3132dce7}
• Medical care, down 0.7{7e5ff73c23cd1cd7ac587f9048f78b3ced175b09520fe5fee10055eb3132dce7}

You may not have noticed the increases because we had experienced much higher inflation last year, when the Denver-area rate hit 9.1{7e5ff73c23cd1cd7ac587f9048f78b3ced175b09520fe5fee10055eb3132dce7} in March 2022. That jump from the Federal Reserve goal of 2{7e5ff73c23cd1cd7ac587f9048f78b3ced175b09520fe5fee10055eb3132dce7}-3{7e5ff73c23cd1cd7ac587f9048f78b3ced175b09520fe5fee10055eb3132dce7} seems to make the latest increase less of a shocker.

“We’re still accelerating fast, just not accelerating as fast as we were a few months ago,” said Joe Craig, interim faculty director for the University of Colorado Colorado Springs Economic Forum. “That’s hard for consumers to notice. I would posit that a lot of consumers are still thinking, ‘Oh my god, prices are still going up. Why is the Fed still doing this? They’re slowing down our economy.’ Yes. But not at the same rate, which is a hard concept to get across and a hard concept to feel because we’ve been anchored to that 2{7e5ff73c23cd1cd7ac587f9048f78b3ced175b09520fe5fee10055eb3132dce7} to 3{7e5ff73c23cd1cd7ac587f9048f78b3ced175b09520fe5fee10055eb3132dce7}.”

Inflation hits lower-income households much harder than the better off. When the price of a dozen eggs or a gallon of gasoline increases, everyone pays the same amount. 

Higher inflation here “probably is just indicative of the fact that Denver is wealthier on average than the West as a whole and the nation,” Craig said. “The higher income brackets are still continuing to spend and that’s probably what we’re seeing with higher inflation in Denver. It is unfortunate though for the working class of Denver, but there’s always a tension like that in popular big cities.”

Looking at core inflation of the past two months, however, points to a more regional impact, said Brian Lewandowski, executive director of the Business Research Division at the Leeds School of Business, University of Colorado Boulder. Remove the volatile pieces like food and energy prices and Denver’s core inflation was at 5.6{7e5ff73c23cd1cd7ac587f9048f78b3ced175b09520fe5fee10055eb3132dce7}, or the same as the nation’s.

“I think the difference is really that the supply issue that we had was a more local phenomenon that drove up fuel prices locally,” he said. “I would expect that to come down because our prices are now coming down pretty quickly. … And on the housing front, we’re still leading the nation down in terms of (Federal Housing Finance Agency) home price index. I think we’re actually going to see the Denver metro region normalize with the U.S. as we progress through the year, perhaps even lower than the U.S.”

➔ Hmm… gas prices are up again. According to the AAA gas price tracker, Colorado’s average price for a gallon of regular gas was $3.57 on Friday, up 11 cents from last week and down 32 cents from a month ago. US prices also went up by 8 cents in a week. AAA’s explanation? “The main culprit is the high cost of oil, gasoline’s main ingredient, which is hovering in the low $80s per barrel. The national average has risen daily since March 29.” >> See gas prices

How it’s going for some Sun readers

Sun readers seem to be doing OK. Roughly 40{7e5ff73c23cd1cd7ac587f9048f78b3ced175b09520fe5fee10055eb3132dce7} responded to last week’s reader poll that their household budgets are the same as last year, though half of that group said it’s because things cost more so they’re buying less but spending the same amount.

Kristiana Huitrón, from Colorado Springs, said that helping her adult children has added to her budget. “I wish my adult children could get jobs that cover medical insurance and retirement and that paid them a wage that would sustain them over their lifetimes,” she wrote.

Cutting down on eating out was the top expense cut from household budgets. The second? Cable TV and other traditional paid-TV services. “Not paying for satellite was the best decision ever,” wrote a person from Arvada. 

On the other hand, Laurence Slivon from Durango didn’t mind paying more for Starlink, the satellite internet service, and for streaming video services. Slivon, who said he’s retired, is ready to splurge. He picked the “Haven’t cut anything” option in the poll.

After an initial big purchase on an electric vehicle, Louisville resident George Burson said he cut out gasoline, which used to set him back about $50 a month. “Since we have solar panels, my electric bill didn’t go up when we got the EV,” he wrote. “I’m adding more solar panels both for the environment and to keep the electric bill down.”

Thanks to everyone who participated in last week’s reader poll. Here’s the next one:

Take the poll: Housing

Other working bits

➔ Denver-based unicorn is now called Guild. Access to higher education has helped employees at Walmart, Disney, Chipotle and others get ahead thanks to their partner Guild Education, the Denver company valued above $1 billion based on venture investment. Now Guild has dropped the second part of its name to bolster their career advancement at those companies. A goal is to offer workers more opportunities and help employers retain staff. CEO Rachel Romer said in a statement, “We are building a movement that lifts up the moral imperative to accelerate access to opportunity for America’s workforce.” >> More from Guild 

➔ Law bans deceptive solicitations for business fees. If you paid more than $1 to register a trade name in Colorado, you paid too much. And now anyone behind deceptive marketing practices to trick businesses into paying “exorbitant costs” could face penalties of up to $20,000 for each violation, according to Senate Bill 37, which was signed into law by Gov. Jared Polis on April 11. The Colorado Secretary of State’s office handles new business formations, change of ownership and other business filing requirements online and probably at a cost lower than you’d think. >> See list of Colorado’s business fees

➔ Colorado mission-driven funds get $30.7 million. Community Development Financial Institutions, often the only financial lender in a community that works with low- and moderate-income clients who traditional banks often won’t consider, received a $1.73 billion boost from the U.S. Treasury Department. Nine are in Colorado and received a total of $30.7 million. That includes First Southwest Bank in Alamosa. Bank CEO Kent Curtis said that First Southwest plans to use the funds to support new loan programs, such as one that will help rural water distribution systems in low-income areas in southwestern Colorado and the San Luis Valley. Here’s the list of Colorado recipients:  

• Colorado Enterprise Fund, Inc., in Denver, $3,718,258
• Community Choice Credit Union, in Commerce City, $2,478,839 
• Community Enterprise Development Services in Aurora, $955,179 
• First SouthWest Bancorporation in Alamosa, $4,957,678 
• Impact Development Fund in Loveland, $3,718,258
• Mercy Community Capital in Denver, $2,478,839 
• Native American Bank in Denver, $4,957,678
• NuVista Federal Credit Union in Montrose, $3,718,258
• Oweesta Corporation in Longmont, $3,718,258

Thanks for sticking with me for this week’s report. As always, share your 2 cents on how the economy is keeping you down or helping you up at cosun.co/heyww. ~ tamara 

Miss a column? Catch up:

What’s Working is a Colorado Sun column about surviving in today’s economy. Email [email protected] with stories, tips or questions. Read the archive, ask a question at cosun.co/heyww and don’t miss the next one by signing up at coloradosun.com/getww. 

Support this newsletter and get Colorado economic news weekly. coloradosun.com/join