The cost to purchase a Colorado home has doubled in the last 7 years, leading the affordability index to be the lowest it has been in 33 years, according to the Common Sense Institute’s most recent report.
The median home price in Colorado is currently $580,275 with a 30-year mortgage rate of 5.22%, according to the report.
Although home prices have decreased by 3% since May, 30-year mortgage rates increased 32% during the same time frame — leaving housing costs high in Colorado and spiking the homebuyer misery index.
The National Association of Home Builders/Wells Fargo Housing Market Index for the Western Region has fallen for eight months, indicating there will be a decrease in the rate of new housing creation in 2023.
In the last 12 months, rising home prices have forced an average of an extra 23 hours of work per month necessary to afford the mortgage on a median-priced home in Colorado, according to the report. Household incomes are not keeping pace with the rising costs.
The report indicates that home affordability since 2015 is 86% lower. Homebuilder confidence has declined 75% since 2020.
“Due in large part to the cost of housing, Colorado is an increasingly expensive place to live,” Dr. Steven Byers, an institute senior economist, said in a news release. “With increased prices and rising interest rates, the affordability of purchasing a home is near the lowest point in more than 33 years.”
According to a recent Denver Gazette interview with Jared Bernstein, a member of President Biden’s Council of Economic Advisors, housing costs are “a challenge.”
Current housing cost trends are due to both local market influences and increased mortgage costs from higher interest rates nationwide, he said. Bernstein expects to see some of those affordability issues recede thanks to the recent interest rates hikes by the federal reserve.
The Institute's report found that 80% of Coloradans live in a county that has a housing supply shortage as of 2021. The deficit in housing sits between 25,000 and 117,000 units, but to fix the issue, approximately 20,000 to 46,000 permits will be needed yearly until 2025 to close this deficit. In total, 97,000 to 220,000 new housing units need to be built by 2025.
In the most populous areas of Colorado, prices could continue to rise due to the attraction to the quality of life amenities and economic factors in the area, according to the report.
View the full report here.