Colorado’s Real Estate Prices
Unique types of real estate exist throughout Colorado where the sun is visible 350 days of the year. Mortgage rates vary with the financial markets, and home prices are directly impacted by the same indicators that affect real estate values in the surrounding states. Because of the diverse geography in Colorado, the potential buyer must be aware of the seasonal variations that can make some portions of the state unreachable during parts of the year. Whether a buyer is interested in the most modern home with every available renewable energy source or prefers a rustic existence off the power grid, the perfect property is available for the right price. Substantial research will enable the newcomer to find the best match to meet personal lifestyle requirements.
Colorado’s real estate market is representative of the geographic and demographic diversity of the state. From the large metropolitan areas on the Front Range, to the multi-million dollar mansions near the world renowned ski resorts, to the scarcely populated counties of the eastern plains, a suitable, affordable home is available in virtually any region within the state borders.
Many Colorado residents enjoy home ownership in two different climate regions that offer opportunities to enjoy the outdoor life sought by the vast number of visitors to the state each year, and the cultural and entertainment choices available from city living. Acquiring real estate in Colorado is straightforward and can be financed with easily understood financial instruments backed by well-thought out laws.
Home Prices
A cursory view of the statistics concerning home prices reveals a dichotomy often overlooked by the uninformed newcomer.
Average Listing Price: $490,492
Median Sales Price: $240,000
Rank: 17th
Highest Listing Average: Pitkin County – $3,157,891
Lowest Listing Average: Lincoln – $77,250
Although Colorado ranks 17th in home prices across the nation, the presence of multi-million dollar listings artificially inflates the average. When home prices in the Front Range cities, where most people live, are evaluated, the average price falls into a more affordable range from $250,000 to $350,000.
Colorado home prices have not suffered the extensive drop in value incurred by other states because of the diversity of industries, employers, and the stability of the population. Colorado ranks 17th in the percentage of the state that is covered by farmland with a remarkable 46% made up of 30,900,000 acres. The volatility in the city dwellers’ mobility is offset by the stability within the farm communities where many families have lived for generations.
Popular Colorado Cities
- Denver, the capital and largest metropolitan city in Colorado, located at the junction of the two major interstate freeways that intersect Colorado, is a sprawling city made up of multiple suburbs that are incorporated into independently governed cities. In 2007 and 2008 the city of Thornton, on Denver’s northeast side, was the fastest growing city in Colorado. The extensive growth was driven by companies that were relocating within comfortable commuting distances from the new homes being built in Thornton.
- In 2009, the city of Mead, Colorado, was the fastest growing city in the state. Located to the northwest of Denver near the cities of Longmont and Loveland, Mead grew from a sleepy rural town to a thriving community where many professionals who worked in nearby cities purchased homes.
- Black Forest, Colorado, is a rural community located northeast of Colorado Springs, which is the second largest city in Colorado. Commuting distance to Denver’s southern suburbs and average lot size of five acres are named specifically as the greatest selling points for real estate located in Black Forest.
- Fort Collins, Colorado, is consistently ranked as one of the faster growing Colorado cities because Colorado State University and many large employers call the city home. As the northernmost city on the Front Range of the Colorado Rockies, Fort Collins has an endless workforce of professionals and a high concentration of engineers of every discipline.
- At the base of America’s mountain, Pike’s Peak is the thriving city of Colorado Springs. One of the most famous cities in the country, where the Olympic headquarters and training center, the Air Force Academy and four other major military installations make up a culture of patriotic pride that draws thousands of visitors and new residents every year.
- In the 1990s, the southern edge of metropolitan Denver experienced explosive growth from the level plains until it reached the geographic limitation of the Palmer Ridge that separates Denver from Colorado Springs, to the south and the foothills on the west. Growth north of the city has been the trend in the twenty-first century.
When newcomers find a gem that is a sleepy little town, the homes are considered very affordable in comparison with the rest of the state, but the prices will escalate quickly in response to the demand by external buyers. Colorado is a coveted relocation choice for many people who are fleeing states where jobs are scarce and taxes and real estate are exorbitant.
Types of Mortgages Available
30-year fixed rate
A fully amortized loan with a term of 30 years where the interest rate is set when the loan is written and remains unchanged for the life of the loan.
Advantages
- Tax benefit of substantial deduction for interest paid on the mortgage loan.
- Set payment amounts without regard to inflation.
- Excellent choice when interest rates are low.
Limitation
Equity builds more slowly than other loan types.
Popularity
More Coloradoans have 30-year fixed rates loan than any other type.
15-year fixed rate
Loan principle and interest is fully amortized for the 15-year term of the loan.
Advantages
- Lower interest rate than the 30-year version.
- Equity will build more quickly than the 30-year loan.
- Less total interest paid through the life of the loan
Limitations
- Higher monthly payment than a 30-year loan.
- Tax deduction for interest paid is lower initially and throughout the loan term.
Popularity
Middle-aged and older buyers prefer the shorter term and have the cash for the higher monthly payment.
Adjustable Rate Mortgage (ARM)
Loan with a changing interest rate based on the rates associated with short-term Treasury bill rates. The lender determines the rates and the movement of the rate during each year of the loan.
Advantages
- Low initial interest rate that will make a home more affordable in the earliest years of the loan.
- Payments will increase as interest rates increase.
Limitations
- Many loans are written without a ceiling on the increases in payments.
- Loan terms can become unmanageable when interest rates rise substantially.
Popularity
- Excellent option for those whose income is set to rise as the loan terms change. ARMs are offered by banks when market interest rates are dropping to provide the buyer an option to lock in a lower rate after the purchase through a refinance option.
FHA/VA Mortgage Loans
Government-insured or guaranteed mortgage loans offered to people who do not meet the qualification criteria for conventional loans. Terms of these loans are similar to 30-year or 15-year fixed-rate loans and interest rates are usually lower because the insurance offsets the perceived risk to the lender.
Advantages
Minimal or no down payment required.
Limitations
- Loan limits are lower for these loans which can prevent the purchase of homes in certain expensive real estate markets.
- Only current and former military service members are qualified for VA loans.
Popularity
Great option for first time home buyers with limited cash for a down payment.
Specific Colorado Laws
The primary security instruments in Colorado are the Deed of Trust and the Mortgage.
Colorado is a recourse state. The lender has a legal right to the collateral attached to the loan in the event the borrower defaults on the obligation to repay the loan.
In 2002, the state of Colorado passed specific legislation to make predatory lending practices illegal. If a financial institution is found guilty, the borrower can recover up to three times the damages incurred plus the costs associated with legal defense. Possible cancellation of the mortgage agreement is also possible under these laws.
Mortgage Rates
- FHA Mortgage Rates – Actual interest rates are set by the FHA and are normally below the conventional loan rate of the identical term.
- Interest-only Mortgage Rates – Terms of the loan state that the borrower has the option to make the minimum monthly payment which will include the interest but none of the principle for a portion of the term. After the agreed period of time, the borrower will make full payments that include the amortized principle and interest.
- Adjustable Rate Mortgage – Available for 1 year, 3 years, 5 years, 7 years, and 10 years, these loans carry low initial rates and allow buyers to purchase a higher priced home. When the term of the loan is up, a new loan is negotiated at the market rate. Payment and interest rate caps are established to prevent the loan from becoming unaffordable.
- Fixed Rate Mortgage – The interest rate and payment amount stay consistent throughout the life of the loan.
- Jumbo Loan Rates – Rates for loan amounts above $417,000 are 0.75 basis points above the conforming rates because the loans are not guaranteed and the financial institution can sell the mortgage after it is written.
- Super Conforming Rates – Loans that carry higher rates of interest that still fall within the conforming range set by the Federal Housing Finance Agency. These rates are set for housing areas that are classified as higher cost, like the city of Denver.
- Conforming Rates – Across the state of Colorado, conforming rates differ based on the county where the mortgage will finance a property. These rates must meet the criteria set forth by the Federal Housing Finance Agency.
Foreclosure process
Judicial and non-judicial foreclosure options are available, but a non-judicial deed of trust sale is preferred in Colorado. In a judicial foreclosure, there is no power of sale, which means that a court order to foreclose must be obtained. Then the property can be sold to the highest bidder.
When a non-judicial foreclosure takes place, a power of sale exists where the borrower has pre-authorized the sale of the property in the event the borrower defaults on the loan. The governor appoints an accountable, impartial “public trustee” for each county who is tasked with handling the “power of sale” clause associated with foreclosures.
After the foreclosure papers are filed in the Public Trustee’s office in the county where the property is located, a “Notice of Election and Demand” is filed. Then notice of the foreclosure is run in the newspaper for five consecutive weeks. The notice must be sent to the borrower within 10 days of the first newspaper publication.
When a borrower defaults on the loan, the lender is required to accept the borrower’s intention to cure the default up to seven days prior to the foreclosure sale.
A deficiency judgment may be sought by the lender through a lawsuit which gives the borrower 75 days to pay the sale price plus interest to reclaim the property. The borrower must file an Intent to Redeem with the office of the Public Trustee in the county where the property is located within eight days of the auction.