For a housing market to be considered balanced, buyer demand matches the housing supply of for-sale homes. This typically occurs when there is at least 4-6 months of housing inventory available for purchase at any one time. Currently, across the country, there are fewer than 3 months of available home inventory of homes on the market, the lowest since the turn of the century (1). In Colorado, there is just over a 3 week supply of single-family homes and a 1.1 month supply of condos and townhomes, the lowest on record. At the end of 2020, there were fewer than 9,000 homes and condos available to Colorado buyers, in a state of 5.8 million people (2).
The housing shortage did not happen overnight. Between 1959 and 2008, housing production across the country ranged from 1 million to 2.2 million new units annually. In 2009, production sank sharply to 500K new units and the trend has remained near record lows (3).
Across Western Colorado, the housing shortage is especially notable. In the last decade, the Front Range of Colorado (the urban corridor between Colorado Springs and Fort Collins) has seen a notable increase in housing stock, while still struggling to meet demand. On the other hand, Western Colorado is growing even faster (4) and has seen little to no increase in housing stock. This, coupled with the pandemic, is driving exaggerated upward pricing pressure. For instance, the average sales price of townhomes and condos increased 63.3% between July 2019 and July 2020 across the entire third congressional district (5), which is essentially all of Western Colorado:
Aggravating this trend, a new phenomenon is emerging, largely driven by the pandemic. Migration to “gateway communities,” or small towns near major outdoor attractions and ski areas is becoming very popular, as work becomes increasingly remote-friendly. A new study published in the Journal of the American Planning Association, shows that populations in these communities were already growing before the pandemic, leading to problems traditionally thought of as urban issues, like lack of affordable housing, availability of public transit, congestion, and more. The study suggests that urban planners and investors can help places adjust.
At Four Points Funding, we are focused on how a community can respond to and benefit from ongoing growth. Higher prices and reduced inventory is a formula to out-price the workforce population that supports the growth and sustainability of a community. By building multifamily housing, the workforce, families, locals and new residents alike will have a place to live by easing the disparity between housing demand and inventory.
(2) Denver Post: Homes in short supply across all of Colorado in December
(3) United States Census Bureau: New Residential Construction
(4) Colorado Division of Local Affairs: Colorado Population Growth
(5) Colorado Association of Realtors: Third Congressional District July 2020 Update