I live in Colorado. A frequent financial topic that comes up in discussions with other folks and in my class is the cost of housing. It is certainly true that housing in Colorado is above the median for the U.S., but as I mentioned in that post I think many Coloradan’s have a skewed view not only of the cost-of-living in Colorado, but they seem to think that housing prices and rents only go up (apparently no one remembers way back to 2008-2011). They also tend to buy into the corollary that buying a house is a good “investment”. It’s not. You’ll likely make money if you stay in your house for at least 8-10 years, but the long-term real return (after inflation) from housing is typically 1-2% (compared to around 7% for stocks).
Well, the latest reports out of Colorado just reinforce this. First, in the Denver metro area, rents are down (~4.8% in the last 12 months; rents are roughly equivalent to what they were 3 years ago). That doesn’t mean rent is cheap, of course, but just that the “common wisdom” is often not terribly accurate. Second, the latest reports from the Colorado Association of Realtors also show that house prices (both single family and condos) are also generally flat or down across the state (there are, of course exceptions). The median price of single family homes in the Denver metro area fell 0.7% over the last year. Again, that doesn’t mean housing is cheap, but the narrative that it only goes up (and by a lot) is simply not true. Even in “resort” areas like Summit County, there are no guarantees (median single family house price down 9.1% from a year ago, condos down 0.8%). Condos across Colorado fell 3.1% last year. Given that inflation was around 3% last year and those numbers look even worse.
None of this is to suggest that housing is cheap in Colorado, or that you shouldn’t buy a house if that’s something you value. But it just reinforces what I’ve been saying in my class for a while now, buying a house is a lifestyle choice, not a particularly good investment. It’s a great thing to do if you value home ownership (we own our home), but make sure you are doing it for that reason and not because you think you are “supposed to” (renting is often the better choice for those who don’t really, truly want to own their home).
Fisch Financial 