More time spent at home pushing Colorado home prices to record highs
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By Robert Davis
Potential buyers can add increased time spent at home because of the pandemic to the list of reasons why home prices in Colorado are reaching record highs, according to economists at the Federal Reserve Bank of Kansas City.
Over the past two years, lawmakers have implemented several programs that helped people keep their homes and stay employed. But these programs also shifted the mobility patterns of homeowners, many of whom are now reluctant to list their homes because of remote work, distance learning, and the need for non-congregate space. These factors have contributed to a decrease in local inventory and put upward pressure on home prices, the economists said.
The latest data from the Colorado Association of Realtors shows that the number of homes listed for sale last year dropped to just over 100,000 available single-unit homes for the year while the average sales price grew by more than 18% to nearly $650,000. The number of days a single-unit home is typically available for sale dropped by more than 37% last year as well, down from 44 days to just 29.
For those looking to purchase townhomes and condos, the picture is direr. Over the last year, the total inventory of townhomes and condos on the multiple listing service dropped by 3% while the average sales price grew by 15% to nearly $500,000.
While the economists described these impacts as “temporary,” they caveated that the connection between mobility and housing price growth may be a more persistent feature of local markets in the future.
“The need to use homes as offices, classrooms, and havens from crowds appears to have altered outcomes in residential real estate markets, potentially in a way that lasts even as public health conditions improve,” said Nicholas Sly, the Denver branch executive at the Federal Reserve Bank of Kansas City and one of the study’s authors.
According to the study, individuals in the Rocky Mountain region were spending upwards of 17% more time at home during the peak of the pandemic in April 2020 because of local restrictions. That total has since moderated but remains 5% above pre-pandemic levels across the region.
The additional 5% of time spent at home correlates with a nearly 4% increase in home prices in most counties it surveyed between Colorado, New Mexico, and Wyoming, the study found.
However, counties in Colorado consistently exhibited faster housing price growth than those in other states, even in counties that had a neutral or net decrease in time spent at home. For example, residents in Denver County spent approximately 8% more time at home than before the pandemic, while home prices increased by nearly 16% last year.
The song remains the same, but louder, in Colorado’s rural counties. Elbert County saw its homeowners spend upwards of 19% more time at home, while its average home sales price increased by 24% to more than $707,000.
One reason why home price growth in Colorado continues to outpace its neighboring states is that home price growth in the state was below that of its peers in 2020, meaning they played catch-up in 2021, Sly said.
Meanwhile, the state is attracting workers from around the country, which has created “additional demand for housing, likely leading to somewhat faster growth in housing prices than experienced in some other states,” Sly said.
According to the latest data from the Census Bureau, most of the people migrating to Colorado are coming from California, Florida, and Texas, and account for approximately 25% of the state’s inbound migration totals.
“The broad connection between mobility and housing price growth – showing up across price ranges, across geographies and through time as mobility patterns stabilized – suggests the excess growth in home values where mobility remains subdued is likely to be a persistent feature of these local markets,” said Bethany Greene, a research associate at the bank.