Colorado Springs might just be a quick, one-hour drive from the state’s capital, but the city has a housing market all its own. In fact, according to the U.S. News Housing Market Index, it’s the sixth-strongest market in the nation.
Looking at the data, it’s no wonder why: The area’s limited housing supply, strong demand from local military personnel and increasing employment opportunities bode well for a healthy market.
Still, mortgage rates are elevated, and new water regulations, as well as skyrocketing property taxes in the county, could play into future supply and demand.
Using information from the U.S. News Housing Market Index, we’ve compiled the data you need to understand the current state of the Colorado Springs housing market. Here’s what you should know about the market over the past year, its current state and what to expect in the months to come.
How the Colorado Springs Housing Market Changed in 2022
Permits for single-family home construction plummeted in 2022, falling from a peak of 552 per month in March to just 95 by year’s end. Things have improved since then, but the total number of permits being approved is still significantly lower than previous year averages.
From January through March 2023, just 563 permits were approved. A year prior, 1,350 permits were approved, marking a 58% decrease in just 12 months.
The multifamily market didn’t fare much better. Permits nosedived from a February 2022 peak of 660 to 209 by December. In the first three months of 2023, 781 multifamily permits were approved compared to 1,938 a year earlier. That’s a 60% slide in one year’s time.
“We are undersupplied,” says Benjamin Day, managing broker at LIV Sotheby’s International Realty in Colorado Springs. “The dynamics of the interest rate environment are keeping builders from resupplying the market with product.”
Colorado Springs Housing Supply and Demand
Thanks to minimal building activity and higher mortgage rates (which often discourage homeowners from listing), overall housing supply in Colorado Springs is incredibly low, clocking in at just a 2.3-month supply of homes. For reference, around 6 months is considered a balanced market.
Still, it’s not all bad news. Supply is actually up 1.3 months compared with a year ago and is on track with national numbers.
“Colorado Springs has a sellers’ market right now because there are fewer homes for sale than are under contract,” Day says.
One thing that could reduce supply further is the city’s new water regulations outlining how and when the city utility can extend water service. The new rules require the utility to keep its water supply at 128 percent of demand before new land can be annexed, or meet other criteria, and could limit the amount of building that can be done in the area
.One more potential disruptor to supply is the area’s property taxes. According to Colorado’s Department of Local Affairs, residential property values are up 44% in El Paso County, where Colorado Springs is located, as of this year’s assessments. This will likely lead to much higher property tax bills and could encourage local residents to list their properties and move elsewhere.
“The sticker shock might encourage longtime residents to consider selling their homes,” Day says. “I am more interested to see how it impacts recently relocated homeowners who bought in Colorado for the first time in the last four years. The California and Illinois transplants that may have justified a move due to Colorado’s more beneficial tax structure, will they stay? That’s what I am monitoring.”
Demand, on the other hand, is just as much of a mixed bag. According to a survey from the University of Michigan, nation consumer sentiment is currently at 67 out of 100. That’s up 4.2 points compared with a year ago but still well below the pre-pandemic norm.
The Mortgage Bankers Association reports that as of May 24, the seasonally adjusted Purchase Index decreased 4.6% from the week prior, indicating a fall in mortgage applications, likely due to higher mortgage rates. The unadjusted Purchase Index was still down 5% from the week prior, and was down 30% year over year.
Those are national stats, though. Locally, Colorado Springs’ large military presence tends to keep homebuying demand strong. The area is home to several Air Force and Space Force outposts, and according to Day, nearly 30% of the city’s first-quarter home sales were funded by VA loans, a type of mortgage available only to military members and veterans.
In 2021, the military announced intentions to move Space Command to Huntsville, Alabama, but it appears those plans may be stalling. If that happens, and the Command remains in Colorado Springs, it could keep demand fairly strong for the foreseeable future.
Median Home Price in Colorado Springs
Last year, home prices steadily declined in Colorado Springs, as they did in much of the country. This largely comes down to inflation and rising interest rates, which have cut into buyers’ budgets and tempered demand.
Prices peaked at $480,000 in June 2022 and have since fallen to about $440,000, according to Redfin. That’s about $40,000 more than the national median but still a 6.4% drop in one year for the area.
Rent prices have gone in the opposite direction, rising from $1,788 per month a year ago to the $1,810 median seen today. Rents are now up 1.2% over the year, according to the Zillow Observed Rent Index.
Rising construction costs could impact both rents and home prices. According to the Census Bureau, construction costs have jumped over 7% nationally in the last year. Should they keep rising, builders and developers may need to pass those costs onto consumers via higher prices.
Unemployment Trends in Colorado Springs
The job market in the Colorado Springs metro is going strong. Total employment is up by 9,300 compared to last year, and unemployment has slipped almost a full percent to just 3.4%. That’s slightly below the national unemployment rate of 3.6%.
According to Jamie Krakofsky, an agent with Keller Williams Clients’ Choice Realty in Colorado Springs, the city’s military presence has a lot to do with its strong employment trends.
“We have seen an increase in jobs as the Space Force has moved into the area,” Krakofsky says. “Space Command, Fort Carson, Peterson and Schriever AFB bring both military personnel as well as new civilian jobs.”
There are also several colleges in the area, and a new hospital is in the works, too. Microchip Technology just announced a big investment in its local manufacturing facility, which should bring even more local jobs to the table. It’s just one of the many tech companies that operate in the area.
“Colorado Springs has seen growth in the technology sector, particularly in areas related to cybersecurity, software development and information technology,” says Kerri Kilgore, managing broker at Realty ONE Group APEX in Colorado Springs. “The city is home to several tech companies, startups and research institutions.”
Tech jobs might be increasing, but those in the local construction sector are waning. The city has lost 400 of those jobs in the last year, according to the U.S. Bureau of Labor Statistics.
Despite the small loss in construction opportunities, Colorado Springs residents seem to be financially stable. The state’s foreclosure rate is a mere 0.2%, according to Black Knight. While that’s up 0.1% compared to last year, it’s well below the 0.46% rate seen nationally.
Builder Confidence in Colorado Springs Wanes
Builder sentiment plummeted in 2022, falling 66 points from peak to trough. Though sentiment has improved slightly in the last few months, it currently sits at just a 41 out of 110 – down 43 points compared to a year ago.
This provides little hope for an uptick in building activity – or new housing supply – anytime soon.
Nonresidential construction, which is measured using architectural billings, has declined quite a bit in the West, falling almost 7% year-over-year, according to the Architecture Billings Index.
Colorado Springs Real Estate Market: Predictions
With strong employment trends, improving consumer sentiment and low levels of housing supply, Colorado Springs is poised to remain a strong housing market for the foreseeable future.
New water regulations, rising property taxes and the possibility of a Space Command move are the wildcards to watch, though. These could impact supply in big ways, but only time will tell.
For now, our forecast predicts supply will remain low. Both single-family and multifamily permits are expected to decline at least through August 2023.