Colorado’s Pre-Foreclosure Decline Masks Deeper Economic Insecurities

A Drop in Numbers, But Not in Struggle

In the world of housing data, a decline in pre-foreclosure filings can seem like good news. After all, fewer homeowners facing the risk of losing their homes must mean fewer families in distress, right?

In Colorado, pre-foreclosure numbers for September 2024 have indeed dropped sharply. Statewide, 200 properties entered the pre-foreclosure phase, a 45.95% decrease from the 370 properties recorded just one month prior in August. Compared to this time last year, when 423 properties were in pre-foreclosure, current filings are down an eye-opening 52.72%.

The numbers point to progress. They suggest that Colorado is riding a wave of relative financial stability or at least dodging some of the pain that other regions continue to experience. But the reality on the ground tells a more complicated story. For many Colorado families, especially low-income households watching the cost of living rise faster than their wages can keep up, this drop isn’t a sign of relief, it’s a reshuffling of burdens.

Pandemic Aftershocks and a Shifting Landscape

To understand today’s housing distress, you need to look back. When the housing market imploded during the 2007–2008 financial crisis, Colorado was among the hardest hit. That year alone, over 45,000 homes entered pre-foreclosure, a record high fueled by risky loans, stagnant wages, and disappearing equity.

For a time, things improved. From 2011 onward, the number of pre-foreclosure filings began a steady descent: 26,679 in 2011, shrinking to just over 5,900 in 2022. In 2021, during the height of COVID-era foreclosure moratoriums, the state reported only 1,003 pre-foreclosure filings, the lowest in two decades.

But behind that brief stability were seismic shifts in the economics of housing. Property values surged statewide, particularly in urban hubs like Denver and Boulder. Fueled by low interest rates and remote work trends, middle- and upper-income buyers poured into the market. Rents climbed, homes became scarce, and would-be buyers found themselves locked out of an appreciation boom.

In 2024, those economic aftershocks are still being felt. Inflation has eased, but core necessities like groceries and utilities remain stubbornly high. Colorado’s unemployment rate, while relatively low, hides deeper vulnerabilities, especially for those in the service and construction sectors, where job security is at best fragile. For minimum wage earners and gig workers, a missed paycheck can make the difference between holding onto a mortgage and spiraling into delinquency.

The Human Cost Behind the Data

Take Michelle D., a single mother in Colorado Springs who asked that her full name not be used. She bought her modest two-bedroom in 2018, back when interest rates were under 4% and buying still made sense. But a series of medical bills and a temporary cut in her hours earlier this year put her on the edge.

By summer, she was behind by two months. In August she received a notice of default. “I felt ashamed even opening the envelope,” she said. Her lender offered a forbearance, but it only delayed the inevitable. By September, she was scraping together side jobs through a rideshare app just to meet her escrow payment. Hers is one of the 200 homes now in pre-foreclosure.

“These are not people being reckless,” says Alex Navarro, a housing counselor with a nonprofit in Denver who works with homeowners like Michelle. “They’re trying to keep up in a market that’s given them no room to breathe.”

A Trend or an Anomaly?

The September decline in pre-foreclosure filings may offer a brief sigh of relief, but it shouldn’t be mistaken for a trend reversal. Not yet, at least. The first nine months of 2024 have seen 2,832 pre-foreclosure filings statewide. If this pace continues through December, Colorado will end the year with fewer than 4,000 filings, significantly less than 2023’s total of 4,965, and far below the more chaotic years of the 2000s.

This subdued activity may reflect stronger homeowner equity and responsible lending practices. But it also raises a tougher question: Are struggling homeowners being pushed to seek alternative, less visible options? Some may be selling preemptively. Others could be turning to “cash for homes” investors, surrendering years of hard-won equity to avoid formal foreclosure. Many could be borrowing from high-interest lenders just to hold on.

In September alone, the steep 46% monthly drop coincided with seasonal hiring slowdowns and a tightening in consumer credit availability. The dynamic hints at a broader suppression of financial options, not necessarily a wholesale improvement in conditions.