Colorado Springs’ residential and commercial markets are expected to largely remain flat in 2025 amid economic uncertainty and fluctuating mortgage and interest rates that have slowed home and property sales, but not mortgages or rents.

Industry experts on Thursday presented on the state of the national, state and local real estate market at the 35th annual real estate economic forecast breakfast hosted at the Great Wolf Lodge on Colorado Springs’ far north side. More than 100 industry members attended the event hosted by the Southern Colorado chapter of the Institute of Real Estate Management.

Colorado Springs home sales rise in January, but housing market remains in ‘the doldrums’

Inflationary pressures, interest rates and ballooning construction costs, among other factors, have contributed to a national and local housing shortage and made it difficult for smaller businesses to find quality commercial properties in Colorado Springs, experts said.

Here are some highlights from this year’s event:

Single-family housing

Residential real estate will likely remain “where it is” in El Paso County this year, thanks to local and national housing shortages, the rising cost of living and consumer’s increasing debt loads, said Tiffany Lachnidt, a longtime real estate agent with Keller Williams Premier.

In the past few years, home sales have declined but prices have not, forcing the average homebuyer out of the market, she said.

Thirty-year, fixed-rate mortgages are at roughly their highest in two decades, reaching 7.04% on Jan. 16 and surpassing the national average of 7%, according to data from mortgage buyer Freddie Mac. Home sales in Colorado Springs fell to a total 11,503 in 2024 — their lowest amount since 11,197 in 2014.

El Paso County and the nation continue experiencing a housing shortage the market hasn’t yet built itself out of after a national pause on homebuilding between 2008-2012, during and following the Great Recession. Colorado is among the most expensive states to live; more people are moving out of state than in, though not at a rate sufficient enough to produce an overage of homes to buy and sell locally, Lachnidt said.

“The lack of affordability has gone from being pretty tight for people to being completely unaffordable for anybody to jump into the market if they haven’t had substantial increase in their income, or if they’re coming from another market where they may have had a lot of equity in their home,” she said.

Increasing costs have also made townhomes and condominiums unaffordable for the average buyer.

“Interest rates combined with homeowners association dues and interests — it’s insanity, what we’re seeing,” Lachnidt said. 

Some insurance companies are declining certain types of coverage for townhomes and condominiums, such as for wind and hail, compelling residents living in the units to pay annual loss assessment dues that can total as much as $9,000 a year.

“Most people living in a townhome or a condo, if they have a hail storm once a year, can’t afford $8,000 or $9,000 for an assessment annually. We’re seeing a substantial increase in our HOA dues on top of what we’re already paying in interest rates and other prices that have gone up,” Lachnidt said.

Townhome and condominium prices haven’t slipped, but that market could soften if there isn’t some relief. Economic projections expect insurance prices and construction costs will continue to increase, she said.

The price of land is likely to continue increasing in 2025 as well because available land is limited in El Paso County and homebuyers can’t afford to build new construction.

Despite economic headwinds, consumers remain optimistic.

“Homes are still … selling. We’ve seen a lot of consumer positivity and a little bit of correction on pricing, and that gets people excited. We just have to continue to work on building people’s equity so that they can get moving,” Lachnidt said. “If we can find a way to control (interest rates) a little bit … I think it would long-term probably create a little bit more stable real estate track.”

Commercial real estate

Purchase costs and rent have skyrocketed for smaller business owners, but things aren’t all bad for the commercial market, said Jim DiBiase, a veteran commercial real estate broker with Olive Real Estate Group.

Construction costs are stabilizing, the Federal Reserve cut interest rates three times in 2024, Colorado Springs continues to experience population and job growth, consumer spending is steady and assessment rates will decrease to 25% over the next two years, down from 29%.

“Those are really good signs for our market,” he said.

More people are returning back to work in the office full-time as employers roll back remote and hybrid schedules necessitated by the COVID-19 pandemic, helping keep the office market strong, DiBiase said. It is challenged by a lack of new inventory, which will put “significant upward pressure” on base rental rates, but DiBiase still expects steady demand for office space in 2025.

The industrial market is the strongest real estate market in Colorado Springs, with about a 3.8% vacancy rate. Large distribution centers are being built across El Paso County, but a lack of smaller office and industrial spaces available, coupled with political uncertainty, the increasing cost to build utilities infrastructure to service new commercial and industrial projects, and “stubbornly high interest rates” present challenges.

“If you’re a small contractor or a small business looking for small bays, it’s almost impossible right now,” he said.

Still, the retail market is “pretty healthy,” thanks to steady leasing activity despite limited new construction, DiBiase said. 

Colorado Springs apartment rents slumped again in the first quarter, new report shows

Apartments

An influx of available apartment units in Colorado Springs dropped average rents but saw the vacancy rate spike in 2024. The silver lining? Demand for apartments is still high, said Kevin McKenna, executive vice president with commercial real estate services company CBRE in Denver.

More than 6,000 apartment units came online in Colorado Springs last year, a record — and more than 10% of the city’s total supply.

“We, frankly, were undersupplied for apartments for a number of years, and it’s caught up dramatically,” McKenna said.

Apartment rents “are more or less holding,” despite the recent influx of supply, but vacancies rose to 7.3% overall.

New apartment buildings that recently came online and are trying to lease units are seeing a vacancy rate of about 15%. Some are offering discounts on rent to fill their vacancies, McKenna said.

“It’s going to take a little while to get through this … but the silver lining is demand is still there,” he said, adding that about 3,700 units have been filled. “I think the bubble of supply is behind us. If this absorption keeps up, we’ll be back to normal here starting probably early next year.”