Colorado suffered the biggest drop in its homeownership rate of any state last year, according to counts from the U.S. Census Bureau. But economists and demographers in the state aren’t buying it.

The homeownership rate, a measure of how many households own the place where they live versus renting it, was 69.7% during the fourth quarter of 2022. It moved up to 70.2% in the second quarter of 2023 before plunging to 62.7% in the fourth quarter.

No other state came close to matching that 7 percentage point decline last year. South Dakota dropped 4.2 percentage points, while New Jersey dropped 4 percentage points. Across all states, the average change was a decline of 0.4 percentage points, with 27 states seeing a drop in their homeownership rates and 23 seeing a gain.

Colorado had an estimated 2,278,044 households in the middle of last year, according to the U.S. Census Bureau. If that drop in Colorado’s homeownership rate is correct, then about 160,000 households switched from owning to renting last year, a dramatic move.

Zoocasa, a property technology firm, looked at homeownership rates over a longer period, from the end of 2018 to 2023. Nationally the rate rose from 64.8% to 65.7%, despite a 50% jump in median home prices. Colorado, by contrast, had the second biggest drop in its ownership rate after Utah, going from 66.3% to 62.7%.

“During the pandemic, an influx of remote workers moved to Colorado. While the population has grown, many of these young professionals aren’t ready to make a major real estate investment. With interest rates high and inventory still low, many short-term and permanent Colorado residents are choosing to rent for the time being,” said Patti Cosgarea, a director of content marketing at Zoocasa, in an email offering a possible explanation for why more households might be renting.

An index from Florida Atlantic University places metro Denver clearly in the camp of overpriced housing markets where it makes more sense financially to rent than to own. Owning a comparable space comes at a 23.7% cost premium to renting, supporting Cosgarea’s argument.

But the Zoocasa ranking includes the suspect 62.7% ownership rate reported in the fourth quarter. Did that many people give up on owning and should policymakers, not to mention real estate brokers and homebuilders, be freaking out?

“Yeah, I really don’t believe that occurred,” said Brian Lewandowski, executive director of the Business Research Division at University of Colorado Boulder’s Leeds School of Business.

For starters, big shifts in homeownership take years to develop, not six months. If a bunch of older residents have cashed out of their homes and relocated to other states, and they are being replaced by a bunch of young renters moving in, that would show up gradually in the numbers.

Colorado’s domestic migration numbers haven’t looked particularly robust since the pandemic, and last year was no exception. Nor are there signs of housing market distress like in the late ’00s, when the homeownership rate fell from 72.1% in early 2005 to 59.4% in early 2015. Defaults and foreclosures pushed thousands of households back into renting.

A likely explanation is statistical, given that the ownership rate relies on a fairly small sample of households. Samples come with a margin of error, or a range within which a number might be correct with a 90% level of confidence.

Last quarter had a margin of error of 3.8, meaning Colorado’s ownership rate could have fallen in a range of between 58.9% to 66.5%.  The fourth quarter of 2022, which was at 69.7%, had a margin of error of 3.6, putting it in a range of between 66.1% to 73.3%.

“If we use simple subtraction and addition, the estimates overlap and are not statistically significantly different from one another,” said Cindy DeGroen, a projections demographer with the State Demography Office.

The change may seem large on paper, but it is allowable statistically speaking. Her advice is to go with annual averages or wait for data from a few more quarters to see if homeownership rates in the state are trending lower.

The annual homeownership rate for 2023 was 67.2%, which was down from 67.4% in 2022, said Greg Totten, an economist at the Colorado Demography Office. That change was one of the smallest in recent years.

The higher ownership rates also seem more suspect than the lower ones, especially the 70.2% rate reported in the second quarter. The last time Colorado had a rate that high was in early 2008 at the tail end of a housing boom fueled by easy credit.

But all the statistical reckoning isn’t to say that Colorado doesn’t face downward pressures on homeownership, chief among them a lack of affordability.

In the fourth quarter, just 23.9% of homes sold in metro Denver were affordable to families earning the area median income, according to the Housing Opportunity Index published by the National Association of Home Builders and Wells Fargo.

Denver ranked 168th out of 241 metro areas tracked by the index and Boulder was right behind it at 169th. Colorado Springs was even less affordable given the incomes available in that region at 21.1%, which ranked 189th.

Greeley and Weld County, according to the index, aren’t a bastion of affordability as commonly perceived. Only 18.4% of homes sold were affordable to households earning the median income in that county, ranking 200th.  That could be a sign that builders in that county are targeting people earning Boulder- and Denver-level incomes more than they are those earning Weld County-level wages.

Pueblo was the most affordable metro in the state with 49.4% of homes, nearly half, affordable to a household at the median income. Even then, Pueblo managed to rank only 88th nationally.

Higher incomes left Denver and Boulder faring better than other metro areas in the state. However, the deterioration in housing affordability has been dramatic. Back in the first quarter of 2014, nearly seven in 10 homes sold were affordable to households earning a typical income in metro Denver. Now it is below one in four.

All that creates intense competition for homes affordable to those making the typical income. Much of the transition from renter to owner happens in the lower-priced tier of the market popular with first-time buyers.

The 2024 Aspiring Homeowner Study, put out by This Old House, looks at where a first-time buyer has the best shot of getting into a home. Denver ranked 101st out of 148 metro areas studied.

But surprisingly, it ranked sixth in the country in terms of the share of owning households in the age range of 25 to 44. That younger demographic owned nearly four in 10 homes, indicating both a younger population and a determined one.

Redfin, a Seattle-based real estate brokerage, notes that investors are also going hard after that entry-level home, accounting for 26.1% of purchases in that tier in the fourth quarter nationally. By contrast, investors bought only 13.6% of mid-priced homes and 15.9% of high-priced homes.

In the aggregate, they bought 18.5% of all homes that sold in the fourth quarter in the U.S. In metro Denver, that share was a little lower at 15.9%.

Investors for years have been betting big on a shift from owning to renting, and they may be forcing that decision in a way by reducing the inventory that first-time buyers can acquire and helping to drive up prices.

“Investors are drawn to affordable homes for the same reason as other homebuyers: They cost less, which is especially attractive when home prices and borrowing costs remain elevated,” Redfin said in its report.

And they aren’t alone in betting on more households renting. Builders in Colorado historically have pulled way more single-family permits than they have multifamily permits, which are dominated by apartments. As recently as 2020, the ratio was two to one in Colorado in favor of single-family.

But in 2022 and 2023, builders pulled more multifamily permits than single-family and they may come close to doing so again in 2024, according to the Colorado Business Economic Outlook from CU.