Colorado Real Estate Market Trends & Analysis


The Colorado real estate market is in rare company. Few state-wide markets (if any) have demonstrated a larger propensity for success than real estate in Colorado. If for nothing else, the entire state has seen nearly every fundamental indicator turn in its favor. While inventory levels leave more to be desired (not unlike every other market across the United States), Colorado has boasted one of the strongest economies for three consecutive years, the market is as balanced as they come, and it continues to rank amongst the best places to call home.

Denver and Colorado Springs, in particular, were recognized as two of the best places to live in 2019 by U.S. News & World Report. It is worth noting, however, that Colorado isn’t merely supported by two cities, but rather its entire real estate market. As the sum of all its parts, the entire state of Colorado boasts a healthy amount of opportunities for anyone looking to actively participate in the housing industry, and real estate investors are no exception.

The Top Colorado Real Estate Markets


While the best real estate market in Colorado is up for debate, here’s a list of the cities investors may want to pay special considerations to:

Colorado Real Estate Fees & Regulations

Real Estate

Closing Conducted by: Title Companies, Brokers, Attorneys
Conveyance: Warranty Deed

Foreclosure Procedure

Primary Foreclosure Method: Non-Judicial
Process Period: 2 - 5 months
Notice of Sale: Trustee
Redemption Period: None

Taxes

Income Tax: 4.63%
Corporate Tax: 4.63%
Sales Tax: 2.90%
Estate Tax: No
Inheritance Tax: No
Median Property Tax: 0.60%
Property Taxes by County: http://www.tax-rates.org/colorado/property-tax#Counties

Average Transactional Costs

Closing Cost: $2,436
Transfer Fee: 0.01%
Origination Fee: $1,817.00

Overview

  • Median Home Value: $378,300

  • 1-Year Appreciation Rate: +3.4%

  • Median Home Value (1-Year Forecast): +1.5%

  • Median Rent Price: $1,975

  • Price-To-Rent Ratio: 15.96

  • Average Days On Market: 50

  • Percent With Negative Equity: 4.5%

  • Unemployment Rate: 2.9% (latest estimate by the Bureau Of Labor Statistics)

  • Population: 5,695,564 (latest estimate by the U.S. Census Bureau)

  • Median Household Income: $65,458 (latest estimate by the U.S. Census Bureau)

  • Percentage Of Vacant Homes: 11.84%

  • Foreclosure Rate: 1 in every 5,994

Median Home Prices In Colorado


For the better part of a decade, median home values in the Colorado real estate market have increased at a faster pace than national trends. Since the first quarter of 2012, when it was clear the market was starting to correct, the median home value in Colorado has appreciated by as much as 83.6%. Median home values across the United States, on the other hand, increased 55.03% over the same period of time. Today, after years of historic price increases, the median home value in Colorado is $378,300.

Despite nearly a decade’s worth of historic appreciation rates, however, the latest Colorado real estate trends suggest the state may have turned a corner. Real estate in Colorado is more expensive than pre-recession levels, which has lead to an easement in appreciation rates. There simply isn’t much more room for prices to go up. Since the beginning of this year (January 2019), the median home value in Colorado has increased .07%. Median home values across the United States increased 2.21% over the same period of time. While higher than they were to start the year, today’s prices don’t have much further to go till they hit a metaphorical ceiling.

Following nearly eight consecutive years of price increases, it is fair to assume Colorado's latest temperance in appreciation rates will last, at least for the foreseeable future. It is unrealistic to expect price increases to maintain the pace residents have grown accustomed to. As a result, there’s a good chance prices will continue to increase in Colorado, albeit at a more modest pace. Over the next 12 months, it’s more likely appreciation rates will rest somewhere in the neighborhood of 2.0%, as opposed to the 3.5% witnessed over the last year.

Real estate in Colorado is more expensive than the national average for two very specific reasons: demand and inventory. For starters, the entire state of Colorado only has about 2.7 months of supply. Down approximately 3.8% year-over-year, Colorado’s available housing inventory isn’t large enough to keep up with demand. As a result, competition has enabled sellers to ask for considerably more each and every year. Perhaps even more importantly, however, is the fact that demand has remained persistent in the face of price gains. Despite today’s high prices, buyers are more inclined to partake in the market than in years past. Thanks to having one of the strongest economies in the country, many Colorado residents are in a position to buy.

Median Rent Prices In Colorado


Not unlike every other market across the country, rental prices in the Colorado real estate market share a direct correlation with home values. For the better part of a decade, in fact, rental prices have increased with their home value counterparts. That said, renting in Colorado appears to be the most affordable option at the moment. With a price-to-rent ratio of 15.96, it is cheaper to rent in Colorado than to own. That’s not to say renting is a better way to save money for a prolonged period of time, but rather that it is more affordable to currently rent in Colorado than to own. As a result, rental demand has gone up, which bodes well for Colorado real estate investors with passive income portfolios.

The median rental price in the Colorado real estate market is $1,975. To put things into perspective, the median rent price in the United States is $1,700—that’s a difference of 14.96%. That said, renting real estate in Colorado is relatively affordable, at least when compared to buying. Considering Colorado home values are nearly 50.0% higher than their national counterparts, a modest 15.0% differential in rental prices seems to lean in favor of renters.

Colorado Foreclosure Trends & Statistics


According to RealtyTrac, a nationally recognized real estate information company that specializes in distressed properties, Colorado has a relatively low distribution of distressed properties. With approximately one out of every 5,296 homes in some stage of distress (default, auction or bank owned), Colorado boasts a foreclosure rate of 1.8%, which remains lower than the 3.9% bar set by the rest of the country. In fact, Colorado boasts a lower foreclosure rate than most of the states across the country. Soaring home prices have returned equity to most homeowners, drastically reducing underwater assets.

It is worth noting, however, that while Colorado has a low foreclosure rate, the state has seen foreclosure activity rise in recent history. Despite an 18% year-over-year decline on a national level, Colorado has seen an increase in foreclosures. “In September, the number of properties that received a foreclosure filing in CO was 13% higher than the previous month and 15% higher than the same time last year,” according to RealtyTrac.

While Colorado’s economy has made significant improvements over the course of the recovery, there are a select few cities with higher distributions of distressed homes. Here’s a list of the cities in Colorado with the highest distribution of foreclosures:

  • Rio Blanco (1 in every 1,124)

  • Washington (1 in every 1,199)

  • Moffat (1 in every 1,253)

  • Morgan (1 in every 1,664)

  • Fremont (1 in every 1,785)


Tax Lien Investing


  • Tax Lien or Deed: Tax Lien State

  • Interest Rate: 9% (Plus Fed Rate) (rate is established by adding nine percentage points to the federal discount rate as of September 1, 2007, and rounding to the nearest full percent).

  • Redemption Period: 3 years until foreclosure can be initiated (non-judicial); plus 120 days after foreclosure initiation. = 3 years, 4 months.


Below you will find a list of online auctions in the state of Colorado. Most counties in Colorado conduct their tax lien sales in the months of November and December. Colorado offers great opportunities for online tax lien investing:

Real Estate Investing In Colorado


Colorado real estate investors, not unlike investors across the country, tend to favor distressed assets. Placing an emphasis on distressed homes increases their odds of locating deals with potentially larger profit margins. That said, there’s one type of distressed property Colorado real estate investors should pay special considerations to: auction homes.

Auction homes represent the largest source of distressed properties in the state by a wide margin. Of the distressed properties identified by RealtyTrac, 84.2% are expected to be placed up for auction. As a result, Colorado real estate investors looking to secure assets with attractive profit margins should attend local auctions. As the largest source of distressed homes in the state, auctions present investors with the best chances of finding a property which may be secured below market value.

Of course, knowing where to find real estate deals in Colorado is only part of the equation. Once investors secure deals, they need to know what to do with them, which begs the question: Which exit strategies are working the best for Colorado real estate investors?

Investors should be able to incorporate all three of today’s most popular exit strategies into their business models: wholesaling, rehabbing and long-term rentals. Despite nearly eight years of appreciation in Colorado, prices still look as if they have room for growth, so it’s reasonable to suspect rehabbers and wholesalers will be able to enjoy respectable profit margins for the foreseeable future. Thats said, Colorado’s real estate market has grown increasingly expensive. Investors who aren’t able to secure distressed homes under market value may have a hard time finding assets with worthwhile profit margins. As a result, Colorado real estate investors should strongly consider investing in rental properties.

Rental properties award investors the ability to offset the high acquisition costs that have become synonymous with real estate in Colorado. With the right property, years of positive cash flow can easily justify buying a home that has appreciated 3.4% in the last year. Additionally, homes are expected to continue appreciating, so investors should be able to consider selling down the road; that is, after they have already collected years of passive income.

Colorado Housing Market Predictions


Regardless of an investor’s experience, it’s nearly impossible to predict the direction the real estate market will head without any degree of error. Regardless of how likely something is to happen, there are simply too many variables at play guarantee anything. That said, Colorado real estate market trends may provide a glimpse into what may happen in the near future.

Using what we already know about the market, it is possible to make well-informed, educated guesses. The secret is to understand that they are just that: guesses. Nonetheless, predictions founded on data and facts may provide enough insight for investors to gain at least a slight edge. At the very least, keeping a finger on the pulse of the market is the simplest way to keep pace with today’s fast-paced market cycles. With that in mind, here’s what investors may see transpire sooner rather than later:

  • Long-term exit strategies look the most promising: Median home values in the Colorado real estate market have escalated almost exponentially in as little as eight years. As a result, deals with attractive profit margins are growing harder and harder to come by. Passive income investors, however, are able to navigate around today’s higher prices by renting the property out for an extended period of time. Several years of renting may prove more than enough to offset the extra money it took to secure the deal. Colorado’s current rental rates should generate enough cash flow to justify acquiring higher-priced assets.

  • Home values will increase at a slightly slower pace: Not unlike the rest of the United States, median home values in Colorado have increased exceptionally fast. Thanks, in large part, to hosting one of the country’s strongest economies, persistent demand, and a lack of available inventory, Colorado has entrenched itself as a seller’s market. Homeowners have been able to increase prices for nearly a decade, but the rate they are able to do so moving forward should temper. Prices are simply too high; there’s not a lot of room for more price growth. Prices should continue to rise, albeit at a slower pace than in years past.

  • Inventory will remain tight: The Colorado real estate market is in dire need of housing inventory; it’s part of the reason prices have risen so high. The state doesn’t even have half of the available housing it would prefer. New construction projects are in the works, but the state simply needs far more inventory than what is expected to come to the market in the next year. More homes are expected to hit the market, but not enough to satiate current demand.

Colorado Real Estate Market Summary


The Colorado real estate market continues to fire on all cylinders, mainly because of a strong economy, and an even stronger desire to live in The Centennial State. The resulting housing industry is, therefore, extremely conducive to savvy investors. While prices are high, strong economic fundamentals continue to allow more people to actively participate in the market, which bodes well for everyone: buyers, sellers, and investors.

Sources:



https://www.census.gov/quickfacts/CO
https://www.bls.gov/eag/eag.co.htm
https://www.realtytrac.com/statsandtrends/foreclosuretrends/co/
https://www.realtytrac.com/statsandtrends/co/
https://www.zillow.com/co/home-values/
https://www.coloradorealtors.com/wp-content/uploads/2019/09/CARInfo_Aug2019.pdf
https://car-co.stats.showingtime.com/docs/mmi/x/Statewide?src=map
https://www.denverpost.com/2019/08/29/real-estate-voices-why-colorados-real-estate-market-continues-to-rise/
https://www.zillow.com/home-values/
https://www.realtytrac.com/statsandtrends/foreclosuretrends/

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