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Signs of Progress on Housing Affordability Inspirational IQ
BY DR. BILL CRAIGHEAD
Housing affordability has been a top concern in the Pikes Peak region. Recent data shows some signs of improvement.
According to the Pikes Peak Association of Realtors, the median sale price of a single-family home in the Colorado Springs area peaked at $495,000 in June 2022. It came in at $455,950 in February this year — down 7.9% from the peak, though up 3.6% from a year ago (it is important to bear in mind that house prices can be somewhat seasonal).
Of course, the cost of buying a home depends not only on prices, but also on interest rates. Although expectations of Fed rate cuts have receded following some of the macro data releases this year, mortgage rates are still down about a percentage point from their lateOctober 2023 peak.
The Atlanta Fed estimates the payment on a home purchased at the local median price as a share of local median income. For the Colorado Springs metro area, this had been below 30% until the summer of 2021. It then increased sharply, reaching a high of 45.4% in October 2023 before falling back to 41.3% in December.
Apartment rents have also become more affordable recently — according to Apartment List, the median rent of a two-bedroom apartment in Colorado Springs peaked at $1525 in August-September 2022, and had fallen by 6.9% to $1420 in February 2024.
Prices are hard to predict. Demand is uncertain, but there are indications that supply may be a source of further downward pressure. After the extreme lows of 2021, the number of single-family homes on the market has rebounded. While it tends to peak in late summer and early fall, we can see that the number of active listings in February 2024 was running ahead of last year’s pace, and higher than at the same point in 2019. This is somewhat different from the national situation — according to Zillow, U.S. February inventory is up 15% from 2021, but still 38% below 2019. For apartments, Apartment List reports a vacancy rate of 8.0% in Colorado Springs for February, which is above the local 2017-2019 average of 5.9%, and also higher than the current national rate of 6.6%.
Construction has been one driver of the additional supply — we are seeing the effects of strong building permits in 2021 and 2022. However, with higher interest rates, the number of dwelling units permitted fell sharply in 2023. Looking further down the road, continued progress on affordability will depend on the extent to which new permitting refills the building pipeline this year.
Dr. Bill Craighead is the Director of the UCCS Economic Forum.
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