The sizzling hot Colorado Springs area housing market is making the area a much less affordable to place to live, according to a quarterly survey.
The local cost of living was 103.6% of the national average in the third quarter, up from 100.9% a year earlier and the highest level the quarterly index has reached since mid-1997, according to the Council for Community and Economic Research.
Much of the increase was driven by housing costs, which have risen from 100.7% of the national average a year earlier to 105.3% in the July-to-September quarter. Housing costs make up 27.5% of the overall index.
Tatiana Bailey, director of the University of Colorado at Colorado Springs Economic Forum, said the local cost of living is being driven higher by thousands of people moving here, mostly from the Denver area, because the Springs area still remains more affordable than most of the nation’s other major urban areas. That’s despite the area’s median housing price being 23% above the national average.
“I don’t see this trend changing, especially with the rising cost of land and building materials. Unfortunately this is crowding out less financially secure individuals who can’t afford these prices,” Bailey said. “COVID-19 has made this problem worse by accelerating the desire to move here and reducing the supply of homes on the market. But people migrating here from more expensive areas still look at Colorado Springs as a bargain.”
Cecilia Harry, chief economic development officer of the Colorado Springs Chamber and EDC, said while the cost of living is important to businesses and families in deciding where to relocate, it is only one of many factors to consider. She said her family decided to move to Colorado Springs last year because “the quality of life and career opportunities outweighed the (higher) cost of living” compared with the small Wisconsin city where they were living previously.
The data for the third quarter was collected in early July, before the supply of area homes on the market fell to record lows for three consecutive months and median prices began increasing at double-digit percentages from the same month a year earlier. Those increases will be reflected in the fourth quarter data that was collected last month and will be released in January, and could push the local index beyond the record 104% reached in the second quarter of 1997.
Transportation and utilities costs also played a role in pushing the overall index higher. The component measuring transportation costs surged from 99.1% of the national average a year ago to 111.6% of the national average in the third quarter, mostly because local gasoline prices fell just 5.1%, while the national average declined 19.1% Utilities costs also rose from 98.7% to 102.8% of the national average during the same period.
The cost of living in Colorado Springs has surged more than 10 percentage points in the past four years, making the area more expensive than Albuquerque, Austin, Texas, Phoenix and Salt Lake City. The area is still nearly 10 percentage points less expensive than Denver and much more affordable than technology hotbeds in Boston, Northern California and the Seattle area.
Elsewhere in Colorado, the cost of living in the Denver area rose to 113.1% of the national average from 112.8% a year ago, while costs during the same period rose in Grand Junction from 99.1% to 99.9% and in Pueblo fell to 91.8% from 94.2%. Nationwide, New York had the nation’s highest cost of living at 248.6% of the national average, while Harlingen, Texas, had the lowest at 75.6% of the average.
The council’s index compares prices for 60 goods and services used or purchased where managers and professions live in 273 metro areas. It’s designed to help managers compare the cost of living when moving to another city.