Look at the chart above, the debt carried by Colorado’s residents is higher than any other state in the country including expensive states like California, NY, etc. The largest factor is mortgages but also note a stark increase in variable debt (credit cards, etc…) Why do Coloradoans have more debt than others? Why is debt an important indicator for real estate prices in the future? What does this mean for the next economic cycle?
What was in the data on Colorado’s debt?
Colorado has the highest level of debt per capita of any state, averaging $90,540 in debt per person in 2024. The second highest state is California, which averages $86,000, while the national average is $61,660. Coloradans have had the highest level of debt in every year since 2020. Colorado has the highest rate of mortgage debt, while being middle of the pack for auto and credit card debt. Mortgage debt in Colorado ticked down slightly in 2024, while most states saw a modest increase. Higher levels of mortgage debt may make Coloradans more exposed to the impacts of high interest rates and changes in the housing market.
“Average wages are higher in Colorado. According to our recent study on the cost of living by state, Colorado has the eighth-highest salary by state,” said Michael Benninger, lead banking editor at Forbes Advisor, in an email.
Even after accounting for the extra money Colorado workers pull down, household debt as a share of household income is 99.85%, the heaviest burden of any state. In California, the debt-to-income burden is 92.6% and in Nevada it is 91.3%.
The average household debt to income burden of all states is at 77%, so debt represents a considerably heavier burden in Colorado than in other states.
Why focus on the debt burden of Coloradoans
The increase in consumer credit is particularly striking as higher rates have yet to deter consumer spending. Despite interest rates on credit cards sitting north of 21%, close to the highest annual percentage rate (APR) in over 30 years (chart), revolving consumer credit has continued to march higher. Rates for other purchases that can comprise large monthly payments for consumers, such as auto purchases, are also much higher. All these financing charges are adding up.
We saw in 2008 that higher debt led to a contagion effect and ultimately substantial mortgage defaults. In this cycle, most mortgage debt is tied to ultra low interest rates, but as consumer debt increases and defaults increase the likelihood that this spills into mortgage payments increases.
What does the high level of Colorado debt mean for real estate prices
With the high level of debt that Coloradoans are carrying, this will limit the upside potential in real estate. The increased debt burden will make it substantially harder for many to qualify for a new mortgage as either a first-time homebuyer or move up buyer. The high debt load coupled with higher mortgage rates will likely freeze the current market.
Fortunately, I don’t see a 2008 redo in Colorado as homeowners have so much equity and in many cases have locked in low-interest rate loans. This will keep the market basically stuck for quite a while as prices still are very high compared to incomes while rates stay well north of 6%.
The wild card in Colorado and throughout the country is more of the variable debt like credit cards or auto loans which are already starting to show some cracks. As consumer debt continues to pile up reaching records for auto and credit card debt, the probability of something breaking has also increased. If we see a noticeable uptick in unemployment look for consumer defaults to rise further and ultimately mortgages, which will put further pressure on prices.
Summary
Colorado has won many awards, but unfortunately leading the nation in debt is not a title that we should be proud of. Higher debt exponentially increases the probability of bad things happening in the economy. Fortunately, Coloradoans have a ton of equity and many locked in low rates which will lead to my base case scenario where real estate will basically kick along for a while with prices basically stuck. Although you will not see major price declines in my base case scenario, it will be extremely painful for anyone selling real estate as transaction volumes will remain low.
On the flip side, there is also a very probable scenario where the increased consumer debt load will ultimately cause a reduction in prices. My guess is that in markets like Denver we will see about a 15% decline in prices year over year. Although this seems like a huge number, around Covid Denver was increasing at 15%+ year over, unfortunately if you just bought a property it will not bring much solace, but for the overwhelming majority they will still be sitting in a great equity position.
Additional Reading/Resources
- Forecast September 2025 | Colorado General Assembly
- https://wellsfargo.bluematrix.com/links2/html/ff77c773-a8e1-499b-a0b4-ba2833005d71
- https://www.denverpost.com/2023/12/14/colorado-consumers-debt-burden/
- https://www.forbes.com/advisor/banking/us-debt-by-state-and-worldwide/
- https://coloradohardmoney.com/colorado-property-taxes-jump-40-percent/
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Glen Weinberg personally writes these weekly real estate blogs based on his real estate experience as a lender and property owner. He is the owner of Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors Magazine, The Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
Glen resides in Colorado, lends in Colorado, owns property in Colorado, and services loans in Colorado which provides a unique real estate prospective of what is actually happening on the ground both in Denver and throughout Colorado. My goal of this real estate blog is to provide an honest assessment of what I see happening in Colorado real estate and how it will impact real estate owners, buyers, realtors, mortgage professionals, etc…
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