Surging housing costs pushed the cost of living in Colorado Springs to a record 106.8% of the national average (6.8% above the average) in the first quarter, according to a quarterly survey.
The local cost of living index in the fourth quarter of last year tied the record of 104% set in the second quarter of 1997, according to the Council for Community and Economic Research. The cost of living index for Colorado Springs in the first quarter of 2020 was 102.9% of the national average and has been above the national average every quarter since mid-2019.
"The average home is up almost $100,000 in the past year and the median (midpoint) is up more than $80,000. A lot of people are being squeezed out of the housing market by this, particularly younger workers," said Tatiana Bailey, director of the University of Colorado at Colorado Springs Economic Forum. "I believe we will experience quite a bit of inflation for at least another year and there is nothing to indicate this will slow down anytime in the near future."
Housing costs have jumped from 104.7% of the national average a year ago to 113.2% of the national average in the January-to-March quarter, according to the Council for Community and Economic Research. Housing costs make up nearly 28% of the overall index, so a big jump in that category has a major impact on the overall number. Miscellaneous goods and services also played a role, rising from 103.5% of the national average a year ago to 108.8% in the first quarter.
"This index measures new home prices, so this is reflecting the increases we are seeing in materials but also the difficulty home builders are having finding labor," said Breann Preston, director of business intelligence for the Colorado Springs Chamber & EDC. "When you have high demand and not much supply, you will see price increases like we have. This is what happens when you are a place where many people want to live."
Dirk Draper, the chamber's CEO, warned in April during a community forum on housing that "the housing crisis we're in, and it is a housing crisis, threatens the success and the profitability, the prosperity of our business community." High housing prices curb business expansion "if their employees can't afford to live here and can't afford to find housing."
The lack of affordable housing "threatens our ability to attract new employers to the region, to diversify our economy, strengthen the depth of our business community," Draper said.
The housing component of the index surged because the average rent for a two-bedroom apartment jumped 13.5% in the past year to $1,558, or nearly triple the increase in the median rent nationwide. The average price of a new four-bedroom, two-bathroom house rose nearly as fast, 13.2%, to $417,521, or more than five times the increase in the national median price during the same period.
All other local index components except transportation also rose from the first quarter of 2020, when compared with the national average, including groceries, utilities and health care. All but groceries and utilities are above the national average — but perhaps not for long since groceries are 99.5% of the national average and utilities are 97.7% of the national average.
The index isn't designed to be used as a measure of inflation over time; it instead is intended to be used by "moderately affluent" households to compare the cost of living when moving to another city. The index compares prices for 57 goods and services used or purchased where managers and professionals live in 265 metro areas, thus it includes more upscale apartments and single-family homes than the average resident would rent or purchase. The index also includes a different number of cities each quarter and has changed criteria several times, making comparisons over time difficult.
Elsewhere in Colorado, the cost of living increased during the first quarter in the other three metro areas included in the council's survey — Denver was at 114.7% of the national average, Grand Junction was at 102.4% and Pueblo was at 95.3%. New York had the nation's highest cost of living at 240.8%, while Kalamazoo, Mich., had the lowest at 76.3%.