Something remarkable is happening in Colorado’s residential real estate market: For the first time in years, buyers hold the upper hand.
The math seems paradoxical. With 30-year fixed mortgage rates hovering at over 6%, monthly payments have surged even as the Federal Reserve chips away at its benchmark rate. When the central bank cut rates by 25 basis points on Dec. 10, mortgage rates barely budged. Investors had already priced in the move weeks earlier, a frustrating reality for those buyers waiting on the sidelines for mortgage rate relief.
But focus too narrowly on interest rates and you miss the larger transformation under way. Colorado’s housing market has fundamentally shifted from the frenzied seller’s market of 2021-2023 to something approaching normal market conditions and, in some cases, tipping into buyer-friendly territory.
The evidence is unmistakable. Inventory has climbed 7.2%, according to the most recent Redfin data, pushing available supply to five months, a significant expansion from the desperately thin inventory that characterized recent years. Homes that once would have sparked bidding wars now sit on the market for months. It’s also much less common for buyers to need to waive contingencies, cover appraisal gaps in cash or offer tens of thousands above asking price just to compete. In many cases, they’re negotiating below listing price.
The irony runs deeper. While today’s rates, hovering in the low-6% range on a 30-year fixed rate mortgage, seem punishing compared with pandemic-era loans, they represent a meaningful improvement from the 7.79% peak of October 2023. On a $500,000 loan—roughly in line with Colorado’s median home price of $625,000—that rate difference translates into savings of roughly $465 per month. Viewed another way, the same monthly payment that supported a $625,000 home at peak rates now supports a purchase price of about $720,000. That extra $95,000 could mean a better school district, an additional bedroom or a more desirable neighborhood.
The golden handcuff effect
What created this buyer’s market isn’t falling rates so much as frozen inventory. Millions of homeowners who locked into sub-3% mortgages during the pandemic now face a cruel calculation: selling means trading their low payment for a new mortgage at double the rate. Even downsizing makes little financial sense when a smaller home costs as much or more per month than a homeowner’s current residence.
This dynamic—often referred to as “golden handcuffs”—has suppressed housing turnover, but it’s also helped stabilized the market. Without distressed sellers or panic, homes are priced more realistically. The National Association of Realtors estimates that if 30-year fixed rates were to fall to 6% with some duration, an additional 5.5 million households would find homeownership affordable, including 1.6 million renters. Colorado sits close to that threshold.
Creative paths forward
For buyers willing to look beyond conventional 30-year fixed mortgages, opportunities abound. Adjustable-rate mortgages (ARMs), largely unavailable in recent years due to limited secondary market appetite, may return to conforming loan amounts in 2026-2027. These products typically offer rates that are about half a percentage point lower than fixed loans, with initial rate locks of seven years.
The calculation favors buyers who view their purchase as a stepping stone rather than a forever home. With rates locked for seven years before adjusting every six months thereafter, ARMs provide breathing room for young families or professionals who anticipate relocating. And history suggests that most homeowners refinance or sell within that seven-year window, anyway.
First-time buyers face the steepest challenge: assembling a down payment while paying rent that already approximates what a mortgage would cost. But Colorado offers assistance that many homebuyers may not realize is available. The Colorado Housing Finance Agency (CHFA) provides grants and deferred loans up to $25,000 for qualified buyers, including first-time homebuyers, first-generation buyers and those with disabilities. Additionally, some lenders contribute closing costs for purchases in low- to moderate-income Census tracts when using Federal Housing Administration (FHA) or Veterans Affairs loans. FHA loans require little money down and, in certain CHFA programs, mortgage insurance can be eliminated entirely.
Stacking these programs can shrink the cash needed at closing to under $1,000 on a modestly priced home. While pursuing these programs requires legwork—financial training courses, grant applications, coordination with local agencies—they can open doors that may otherwise seem permanently locked. An early-in-the-process conversation with a mortgage professional and seasoned real estate agent can help prospective homebuyers identify solutions and a path to homeownership.
Timing the market
With the mortgage spread between 30-year fixed rates and 10-year Treasury yields still elevated by historical standards, another half-percentage-point compression could push mortgage rates into the 5.5% to 5.75% range without further Federal Reserve action.
What this all means is that Colorado’s housing market presents a potential buying opportunity for those who can afford it and are buying a home they plan to stay in for a few years. Rates remain elevated but are falling gradually. Inventory has expanded but could tighten if rates move lower than expected and unleash pent-up demand. So now is a good time to be out looking for the right home if you are thinking about buying in Colorado.
Brian Kelso is Colorado region president at Huntington Bank and Josh Postlewait is Colorado mortgage sales manager at Huntington Bank.