(The Center Square) - Colorado saw a sharp drop in home sales, according to a new report.

The Colorado Association of Realtors released data showing that statewide home sales fell 19% in October 2026 compared with October 2025.

In October 2026, Colorado saw only 6,079 homes sold, compared with 7,464 at the same time last year.

Patrick Muldoon, a real estate agent in Fort Collins, told The Center Square that Colorado lost nearly 10% of its home sales year over year. He called this rate “significant.”

The numbers are being reported following concerns over mortgage rates and the Federal Reserve's Sept. 16 decision to raise the federal fund interest rate to 4% from 3.75%. The Fed raises or lowers this rate to manage inflation, employment and economic growth.

Kelly Moye, a Boulder real estate agent, said high mortgage rates have affected home sellers and buyers.

Moye told The Center Square that people who bought their home when mortgage rates were low are hesitant to move because they are “either unwilling or unable to afford new payments” at current mortgage rates above 7%. Mortgage rates were just above 6% during October 2025.

Muldoon said he expected Colorado home prices to decline in 2027, while Moye said if the Federal Reserve raises interest rates again in December, it could continue to stall Colorado’s housing market next year.

If the Federal Reserve leaves rates alone, Moye said 2027 will be a “good year” for the state’s housing market.

She told The Center Square that the high mortgage rates are affecting Colorado’s inventory because “sellers who would typically have moved by now are deciding to stay, remodel [or] do what they need to do to hold onto that rate and that payment.”

Moye said Colorado home buyers “are incredibly rate sensitive.” As mortgage rates have gone above 7%, they have stopped searching for homes.

Moye said she's concerned if the Federal Reserve announces another rate increase, it will cause home buyers to remain sidelined.

She said these buyers not looking could hurt the state’s housing market at the beginning of next year.

Colorado home buyers “are getting used to rates where they are," Moye said.

She added that Colorado’s housing market has a lot of “pent-up demand.”

Orphe Divounguy, chief economist at The Center Square, said the Federal Reserve does not set mortgage rates, but rather that mortgage rates “depend primarily on longer-term Treasury yields [and] inflation expectations.”

Markets are expecting the Federal Reserve to raise interest rates “two or three times in the coming year,” which is “why mortgage rates have already moved higher,” Divounguy told The Center Square.

As long as mortgage rates stay above last year's level, Divounguy said this will “discourage both buyers and sellers.”

He said this would “result in home sales remaining at the low levels that we’re seeing right now.”

Divounguy said it is “unlikely” home sales would decline further because the labor market has “stabilized somewhat” and “mortgage rates already reflect expectations of persistent inflation in the near future.”

The economist noted the likelihood of mortgage rates increasing is "small unless [America sees] inflation rise even further.”

He added that he expects mortgage rates to come down “a little bit” in 2027 as long as another economic shock does not occur.

Divounguy said a potential economic shock could occur if Congress cannot fund the federal government by Dec. 11, causing a government shutdown.

Another government shutdown would cause “uncertainty and financial market volatility that could potentially cause yields and mortgage rates to increase,” he noted.

The Colorado Association of Realtors, meanwhile, said new listings fell 8.9% from October 2025 to October 2026 and added that single-family properties are on the market an average of 68 days.

Muldoon said Colorado’s real estate market is a buyer's market.

“Sellers have lost their edge on the market, and they need to realize they have to become more realistic about what the market’s willing to bear,” he said.

Common Sense Institute Colorado, a nonpartisan think tank, released a report showing Colorado Springs (56%) and Denver (55%) had the highest shares of home listings with price cuts among American metro areas with at least 5,000 listings.

While price cuts are occurring across Colorado, home sellers are also offering incentives to home buyers.

The Realtor association said nearly two-thirds of homes sold in Denver, Colorado’s biggest city, last month included seller concessions.

Moye noted these homeowners are giving around 3% of the home's price in concessions to home buyers. Concessions can be used to bring down costs related to the mortgage.

According to the Realtor association, the median sales price for a Colorado home is $545,000. The average rent in Colorado is nearly $1,600 a month, apartments.com says.

One factor contributing to Colorado’s high cost of living is the average household size. A recent CSI report showed that the average Colorado household has shrunk from 2.55 people in 2020 to 2.45 in 2024.

DJ Summers, CSI’s director of communications and research operations, told The Center Square that people “don’t live with each other as much as they did before.”

The decrease in household size led to nearly 90,000 new households during this time period, Summers noted.

The report found that smaller living units are more expensive to build than larger ones.

A one-bedroom home costs more than 70% more per bedroom than a three-bedroom home, the report said.

Denver increased one-bedroom units by 164% from 2005 to 2024, from about 8,700 to 23,000 units, according to the report. The report also said one-bedroom and studios account for more than 33% of all homes added in the past 20 years.

The report predicted the average Colorado household would decrease to 2.34 people by 2050.

Summers said by 2050, 20% of the increase in households will result from fewer people living together per home.

Colorado will “need more homes simply to fill natural demand as people get these new households,” he explained.

Even as Colorado’s housing remains expensive, only a handful of occupations have regained the ability to afford a home in the state.

An October study from the National Housing Conference showed that 19 occupations regained the ability to buy a home, while 51 regained the ability to afford a two-bedroom apartment in the state from 2024 to 2025.

Brittany Webb, senior research director at NHC, told The Center Square that the trend is only one year old, so she will continue to follow it to see whether the trajectory continues.

Webb said the people who could afford homes again were in professions with “upper middle class earnings,” such as dentists, managers and engineers.

She noted in 2025, the average salary of people who could afford a home again was $144,450.

Furthermore, Webb said the average salary of someone who could afford a two-bedroom apartment was $77,331 in 2025.

Webb said when high-income earners are in their home-buying years but can’t afford a home, they will remain renters, which means people who “are on the lower end of the income spectrum are going to find it even harder to find affordable rental housing.”

Colorado is “still very unaffordable,” she said, adding that “there’s plenty of improvement that needs to happen.”