After recovering from the pandemic-driven slowdown at a blistering clip in 2021, economists anticipate that Colorado's economic growth rate will slow somewhat in 2022. Expectations that the state's housing market could follow a similar track, especially given the likelihood of mortgage rates moving higher, could prove advantageous, according to Bill Sullivan, Colorado market president and CEO, BOK Financial®.
"We're seeing the possibility of increased mortgage rates at least dampening appreciation in the housing market, and I don't know if that's a bad thing," Sullivan said. "Because affordability has become such a big issue in Colorado, we could see more challenges if price growth doesn't cool a bit."
The median price of a single-family home in the state jumped 18.0% in 2021, according to the Colorado Association of REALTORS, boosted by a 22.1% jump in the average sales price in Douglas County, a 19.7% rise in Jefferson County, an 18.4% increase in Arapahoe County and a 17.6% rise in Denver County. The association still sees tough conditions for home buyers in 2022, which it acknowledges could push prospective new residents elsewhere, although it projects price appreciation will not be as high as in 2021.
Source: Colorado Association of REALTORS
More broadly, the Colorado Secretary of State reported that the state's GDP is poised to expand by 3.9% in 2022, according to consensus forecasts, after growing at a 5.7% rate in 2021. Sullivan sees a rebound in the vital tourism and hospitality industries helping fuel the continued expansion.
"I think as people are returning to a more ‘normal' existence and moving on from the pandemic, they're feeling much better about conditions and their activity is returning to more historical levels," he said. "Whether that means they're eating out more at restaurants, going on vacations or simply spending more time outside of the house than staying in, the upside has a potentially high impact on a lot of businesses in those sectors."
Business leaders across the state have similarly rosy expectations as the University of Colorado Leeds Business Confidence Index is positive for both the first and second quarters.
Business leaders in the quarterly Leeds survey acknowledged that inflation, lingering COVID-19 concerns, supply chain issues and workforce constraints are risks to growth projections, although some said an improving COVID-19 landscape and robust demand are providing tailwinds.
Higher commodity prices are also poised to elevate the state's oil and gas interests as well as agricultural firms that are still contending with drought-related challenges, according to the Colorado Business Economic Outlook.
"Oil and gas producers in the region have definitely benefited from higher energy prices, and we're seeing them use a portion of that excess cash flow to reinvest in their properties," Sullivan said.