Will Colorado become one of the most expensive states for housing in the next 10 years?
If the next 10 years are like the past 10 when it comes to home price appreciation, Colorado will become one of the most expensive states in the country for housing, according to Renofi, a website that helps consumers find financing for home renovations.
Using numbers from Zillow, Renofi projected out what average home prices might look like by September 2030 if the rates of appreciation over the past decade are repeated. In the case of Colorado, another 82.2% gain would push the average home price to $763,309, double the U.S. average of $382,000 and the fourth most expensive after California, Hawaii and Washington.
For metro Denver, the average home price by September 2030 would reach $928,267. Based on Renofi’s estimates, metro Denver would rank as the 11th most expensive housing market out of the top 50 metros, right behind Washington, D.C., and ahead of Portland, Ore.
Colorado Springs would rank as the 19th most expensive metro area with an average home price of $564,471, sandwiched between Las Vegas and Atlanta.
Forecasting a repeat in appreciation requires making a lot of assumptions, some of which are already being challenged. COVID-19 has made employers more open to remote work arrangements, which opens the door to hiring workers anywhere. Those workers, in turn, might want to stretch their money further by buying homes in less expensive markets and taking jobs in more expensive ones with better opportunities.
West Virginia, Mississippi, Oklahoma, Arkansas and Alabama will be the most affordable states for housing by 2030 and the most affordable metro areas will be Detroit, Memphis, El Paso, Baltimore and Tulsa, per the forecast.
Putting arguments of quality of life and days of sunshine aside, is the privilege of owning a home in Denver really worth 11 times that of owning one in Detroit?
Interest rates are another wild card. Lower rates make monthly payments more affordable and in the markets where builders have failed to provide enough supply, they have resulted in bidding wars that have pushed up prices.
When mortgage rates start moving higher, potential buyers will have to be able to shoulder more expensive payments, which could reduce demand. The most vulnerable markets could be those where home price gains have far outstripped wage gains and where there is still land available to build on.