I have been a real estate agent and broker in Colorado since 2002. I have also been a real estate investor in the Colorado market. I keep a close eye on real estate, and I have been wondering if the housing market slowed down in Colorado. I am in the Northern Colorado area and have 16 house flips in progress. I am also the managing broker and owner of Blue Steel Real Estate. I need to make sure I stay on top of what the market is doing, and it appears to me that the market may indeed be slowing down.
What signs are there that the Colorado housing market is slowing down?
I pulled some statistics for my office meeting last week which showed the sales, listings, and prices for the last money in 2018 versus the same time in 2017. The results showed that prices have increased again in 2018 but that there are also more listings and fewer sales than there were last year. From being in the market, it has felt like things have been slowing down, but I have said that before only to see prices jump 10% in the next six months.
The stats below show what our local market in Greeley and Evans Colorado have done in the last month compared to the same time period last year.
From the stats, you can see the median sales price went up $30,000 in Greeley, Colorado month over month in the last year. However, fewer houses sold, and more houses are coming on the market. There are also more listings being withdrawn or expiring this year than last. I am in Northern Colorado, but I have talked to numerous agents and brokers across the state who think their market is slowing down as well.
How much have housing prices increased in Colorado?
Denver’s median home value has increased from $208,000 in 2012 to over $400,000 in 2018 according to Zillow. Zillow also states the median price in Greeley went from $134,000 to $272,000. If I look at my MLS statistics, they show the median price in Greeley has gone from $114,000 in 2011 to $300,000 today. There are also some stats that show the median value in Denver is over $500,000 now.
Whatever the exact numbers are, the housing market in Colorado has seen a meteoric rise in the last 7 or 8 years. It only makes sense that the real estate market would slow down here at some point.
What has caused the increase in prices in the Colorado housing market?
Colorado has a very unique real estate market. Many people think that building is cheap and it would be easy to build here because there is a lot of vacant land. While there is a lot of land in Colorado, it is not cheap to build on. Water is very expensive in Colorado, and it can cost more than $30,000 to buy a water tap for a single lot. The price of land has also increased greatly with the improving real estate market. Colorado also has a great economy right now, and labor is not cheap.
Greeley has one of the most inexpensive markets to build in, and the cheapest new-construction houses are almost $300,000. They are not building nearly enough houses to meet the demand. This has lead to a shortage of housing in Colorado. Prices keep going up because there are not enough houses, people keep moving in, and there are plenty of jobs.
What is causing the housing market to slow down in Colorado?
They have not been building more in Colorado, but things do appear to be slowing down. One of the things causing the slowdown is asking prices for houses keep increasing. Sellers see how much prices have been increasing and keep asking more and more for houses assuming prices must keep going up. After a point, house buyers have to wonder if it is worth it to buy a house at these prices or if they can afford to buy a house at these prices.
In the past, we have seen slowdowns as well, but during those slowdowns, there was still very low inventory. This time, there are more houses for sale, which indicates the market could be turning.
Will we see a huge drop in housing prices in Colorado?
I said the real estate market could be turning in Colorado, but that does not mean I see a huge drop in prices coming. Prices could stay stable or decrease slightly, but I don’t think we will see a crash. The market conditions are much different than they were during the last housing market boom. The last housing crash was caused by horrible lending guidelines and overbuilding. Neither of those are happening this time around. If we see a slowdown, I do not see things crashing down because there are still not enough houses for everyone who wants to and can buy one. In the last crash, there were simply too many houses for everyone, and a fire sale was needed to even out the supply and demand.
What can you do to protect yourself from a market slowdown?
I have many investment properties in Colorado that are rentals or house flips. I also run a real estate brokerage, so I have to be careful betting on a hot market. In fact, I have never made investments or run my business assuming that prices will increase. Even when we were at the bottom of the market around 2011, I did not know the market would increase, and I do not know if anyone thought it would catch fire like it has. I thought there was a good chance the market would recover at some point, but there were also many economists back then predicting another bigger crash to come in the next year or two.
Whether the market is going up, down, or is stable, I think people need to be careful when buying houses. You cannot assume prices will go up to make your money. I have not bought any flips in the last month because I have not seen good enough deals. I see other investors paying much more than me for properties, and I wonder what will happen if the market does change. My rentals all generate money whether the market is going up or down because the rents more than cover the expenses. I have plenty of room built into my flips for unexpected costs or market changes. If you are buying a personal residence to live in, make sure you can afford it.
The market in Colorado seems to be slowing down, and I have heard it is slowing down in other parts of the country as well. Like I said before, I have thought the market was slowing down before only to be completely wrong. If the market does slow down, I do not see a crash coming but a stabilization. If we start to see a huge increase in building, I would start to worry more about a market crash.