What is in store for the Colorado housing market in 2019?
Real estate investors are searching for the best places to buy and invest in properties in 2019. Is Colorado one of these places? Some people think Colorado is in an isolated bubble. However, we can’t ignore the fact that Denver, CO made it in the PwC’s Emerging Trends in Real Estate Report as one of the top 10 housing markets to watch in 2019! This should be a positive indicator of real estate in the state of Colorado.
Related: 10 Best Places to Invest in Real Estate in 2019
In this blog post, we study the different trends affecting the Colorado housing market to see if it truly has the potential to offer profitable investment opportunities. This will help property investors understand what makes a Colorado rental property a good investment in 2019. Furthermore, we list the top 10 cities in the state to consider if you’re looking to buy traditional or Airbnb rental properties. Let’s get started.
Economic and Population Growth Trends
For long-time residents in the Colorado housing market, it’s not really a surprise that the state is the seventh fastest growing in the country. It’s been a hidden gem for a long time, but there has been a massive spike in newcomers in recent years. The Centennial state grew by nearly 80,000 people last year, which is a population growth of 1.4%. This outperformed the national average of 0.6% according to the U.S. Census Bureau. Once a primarily rural state, Colorado is now rapidly urbanizing.
Furthermore, the last few years have been very impressive in terms of economic growth for Colorado. The economy in Colorado grew 4.5% year-over-year in Q1 2018 according to the Bureau of Economic Analysis (BEA). In addition, the state added about 72,200 jobs last year (year-over-year growth of 2.7%). As of June 2018, the unemployment rate in Colorado is 2.7%, much lower than the national average of 4%!
Not surprisingly, these factors helped Colorado rank in the top 10 states in America where you are most likely to land your dream job. With a booming population and strong economy, it’s expected that the Colorado housing market 2019 will remain a good place for real estate investors.
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Home Prices and Values Continue to Climb
Experts say builders “went to town” in Colorado after the Great Recession by building a lot of homes. That pace, however, is now slowing down. Because there are fewer new homes for sale across the state, prices have started and will continue to go up. The Colorado housing market also has been deeply impacted by the increased cost of living as well as the rising mortgage interest rates across the US. According to Mashvisor’s data and analytics, the median price of Colorado homes for sale is $547,100 ($697 median price/square foot).
Related: House Price Trends to Expect in the US Real Estate Market 2019
As for property values, the median is $374,100 according to Zillow’s data. This is a 6.6% increase over the past year and Zillow predicts they will rise 4.5% in 2019. For real estate investors, these numbers indicate Colorado is enjoying substantial real estate appreciation. For homebuyers, on the other hand, this shows that it has become unaffordable for many to buy a house in the Colorado housing market. This leads us to the next market trends that Colorado real estate investors should know.
Dropping Home Sales + Growing Rental Market
As a result of the rising property prices, home sales in the state have dropped while rental vacancy rates remain low. This is because, despite the strong economy, some residents still struggle to make a living in Colorado because of rising housing costs in many of its cities. As a result, home sales have dropped in the Colorado housing market last year according to a monthly update from the Colorado Association of Realtors.
The report claims that Denver saw home sales drop while prices continue to rise. Colorado Springs and El Paso County, the next biggest housing market after Denver, also suffered a 5.5% drop in single-family home sales and an 8.6% drop in condo and townhome sales in 2018 compared to 2017.
Since affordability is a challenge for residents of the Colorado housing market, many are choosing to rent a house over buying one. In turn, this means that the demand for rental properties is growing, which is good news for Colorado real estate investors. As an owner of a rental property investment in the state, you’ll enjoy low rental vacancy rates. The rental income is high enough ($2,014 according to Mashvisor’s data) to generate cash flow and a decent return on investment.
To look for investment properties and analyze their potential returns in your city and neighborhood of choice, click here.
Colorado Is a Landlord-Friendly State
Another benefit of owning rental properties in the Colorado housing market is that the state is one of the top 5 landlord-friendly states in the country. According to Auction.com, Colorado is one of the few states where landlords can access the rental property without a 24-hour notice for a reasonable cause.
In addition, it’s much simpler and quicker to evict your tenants who don’t pay their rent as law enforcement takes the side of rental property owners. The demand for compliance notice is limited to 72 hours – during which tenants may pay off their arrears – and evictions take place within 48 hours after the demand for compliance expires. As you can see, even though the Colorado housing market is an expensive one to invest in, it’s a fantastic place to be a landlord if you come across a good real estate deal!
Related: Invest in Real Estate in the 5 Most Landlord-Friendly States
What About Airbnb Rentals in Colorado?
It’s no secret that Colorado is a hot tourist destination in the US, making it a good location for renting out vacation homes to short-term guests. Whether it’s winter or summertime, the state has a little something for everyone. Skiing, snowboarding, climbing, biking, hiking, kayaking; you name it! Outdoor enthusiasts keep coming back to visit Colorado not only to enjoy these activities but also for its magnificent natural landscape.
Many have realized the financial benefits of renting out vacation home rentals to these tourists. According to AirDNA, Airbnb listings in the state of Colorado shot up from almost 6,000 four years ago to over 36,000 in December last year! In addition, nearly 2 million Airbnb guests generated over $300 million for hosts in the Colorado housing market in 2018. But what about Airbnb laws and regulations in Colorado?
Airbnb is legal in the state. However, there are some rules real estate investors should know before investing in Airbnb rentals here. The main thing that can make investing in short-term rentals difficult in some cities in Colorado is the “primary residency” requirement – meaning Airbnb hosts renting out a property have to live on site. This rule applies to Airbnb hosts in Denver, Aurora, and Golden.
According to The Denver Post, the reason behind this requirement is that buying homes to rent out to vacationers reduces the amount of housing stock that could be offered to permanent residents. However, many residents are renting out Airbnb property separate from their main residence. This requirement will force them to close their businesses and suffer significant financial losses.
While many smaller cities in Colorado still don’t enforce this rule, other laws are still scattered. Real estate investors thinking of renting out on Airbnb in the Colorado housing market should keep a close eye on the regulations in their city of choice as this “tension won’t end any time soon” according to The Denver Post.
Top Cities for Traditional Rentals in the Colorado Housing Market
Here are the top 5 cities to invest in traditional rentals to look into for buying an investment property in Colorado. The following data is provided by Mashvisor’s Investment Property Calculator – To learn more about our product, click here.
Silver Cliff
- Median Property Price: $461,529
- Price/Square Foot: $195
- Traditional Rental Income: $1,995
- Price to Rent Ratio: 19
- Cash on Cash Return: 7%
Walsenburg
- Median Property Price: $282,114
- Price/Square Foot: $180
- Traditional Rental Income: $1,143
- Price to Rent Ratio: 20
- Cash on Cash Return: 7%
Crawford
- Median Property Price: $422,125
- Price/Square Foot: $261
- Traditional Rental Income: $1,200
- Price to Rent Ratio: 29
- Cash on Cash Return: 5%
Mead
- Median Property Price: $619,305
- Price/Square Foot: $171
- Traditional Rental Income: $4,447
- Price to Rent Ratio: 12
- Cash on Cash Return: 4%
Sterling
- Median Property Price: $191,200
- Price/Square Foot: $102
- Traditional Rental Income: $1,341
- Price to Rent Ratio: 12
- Cash on Cash Return: 4%
Top Cities for Airbnb Rentals in the Colorado Housing Market
Thinking of investing in short-term rental properties to make money in real estate? Consider one of these 5 cities as they can provide high returns according to our data. Nonetheless, remember to check the Airbnb laws and regulations in your city of choice before buying a rental property to rent out to Airbnb guests!
New Castle
- Median Property Price: $457,527
- Price/Square Foot: $215
- Airbnb Rental Income: $4,636
- Airbnb Occupancy Rate: 55%
- Cash on Cash Return: 8%
Manitou Springs
- Median Property Price: $431,800
- Price/Square Foot: $199
- Airbnb Rental Income: $4,698
- Airbnb Occupancy Rate: 64%
- Cash on Cash Return: 8%
Dolores
- Median Property Price: $505,791
- Price/Square Foot: $223
- Airbnb Rental Income: $3,945
- Airbnb Occupancy Rate: 44%
- Cash on Cash Return: 6%
Grand Junction
- Median Property Price: $263,014
- Price/Square Foot: $146
- Airbnb Rental Income: $2,201
- Airbnb Occupancy Rate: 61%
- Cash on Cash Return: 5%
Fairplay
- Median Property Price: $442,573
- Price/Square Foot: $222
- Airbnb Rental Income: $3,482
- Airbnb Occupancy Rate: 62%
- Cash on Cash Return: 5%
Even though it’s currently a sellers’ market in Colorado, you can still find affordable and profitable rental properties for sale using Mashvisor’s real estate investment tools! To get access to our real estate investment tools, sign up for a 7-day free trial of Mashvisor today, followed by 15% off for life.