The pandemic put a torch to U.S. home price appreciation, resulting in gains surpassing those seen even during the headiest years of the housing bubble. And in that hot national market, Colorado stands out for how many areas are seeing double-digit gains in home values.

The state is one of eight where half or more of the ZIP codes have measured double-digit gains in the 12 months through July on the Zillow Home Value Index, according to a study from Headwaters Economics, a research firm based in Montana.

"The housing bubble pales in comparison to the price increases we are seeing now. Hopefully, it slows down," said Megan Lawson, an economist with Headwaters who conducted the study.

If not, more households will be prevented from attaining what has long been the major source of wealth creation in the country, and the gap between those who own a home and those who don't will only widen.

Lawson looked at how home prices in every U.S. ZIP code performed on the index going back to 1996. The period from July 2020, when the housing market was gearing up again, to July 2021 was unrivaled for the size of gains.

What Lawson said stands out in the current surge in home prices compared to earlier ones is how widespread it is and how deeply it has reached remote and rural areas long considered affordable and once insulated from the housing frenzy seen in more populated areas.

The home price gain leader in Colorado is tiny Jaroso in Costilla County, an unincorporated area where home values are up nearly 33%, followed by Phippsburg in Routt County, up 28.5%.

With the exception of some foothill enclaves, the strongest gains in home prices aren't coming in metro Denver, but rather resort areas like Summit and Routt counties, in Colorado Springs and Pueblo, and out in Mesa County on the Western Slope.

"Our biggest driving factor in Colorado Springs is we have a complete lack of inventory. Every single month we seem to be breaking records from months before and years before," said Patrick Muldoon, managing broker of Muldoon & Associates in Colorado Springs.

Of the 20 ZIP codes with the highest home price appreciation rates out of the 494 studied in Colorado, five are in Colorado Springs. They include 80915, 80917 and 80907, where the typical home value has risen by a quarter or more in just 12 months, and 80918 and 80903, where home values are up around 23%.

Some of the strongest gains in El Paso County have come in the pockets once considered relatively affordable, areas hit hard with foreclosures during the Great Recession, Muldoon said. But prices are rising across the board in El Paso County, including in Fountain and Cascade, which both registered gains of 23%.

Colorado Springs for years has seen a conveyor belt delivering metro Denver residents searching for more affordable housing options, especially on the north end, Muldoon said. The shift to remote work arrangements and record-low mortgage rates appears to have sped up that flow, and priced-out Denver buyers were also increasingly joined by deep-pocketed investors looking to lock down rental properties.

As home prices rise in Colorado Springs, more residents on the south end are searching down in more affordable Pueblo, which saw a 22.4% gain in its home price index in the 81003 ZIP.

Pueblo has struggled more than any other Colorado metro to recover from the economic blow dealt by the pandemic. In July, it nursed an 8.9% unemployment rate, one of the highest in the country. And yet home prices rose 20% plus, which doesn't line up with an economy struggling like that.

"Flying by the seat of our pants"

The Zillow Home Value Index tries to get at the value of a typical home in a given geography, making it different than measures that track the price of properties sold in a given month, which are influenced by the mix of homes selling at a given point in time.

As of August, the statewide rate of home price appreciation on the Zillow index was running 20% in Colorado, said Jeff Tucker, senior economist at Zillow. Going back to 2000, a period that includes the housing boom, annual home price appreciation has averaged 3.9% in the state.

Effectively, Colorado's housing market has found a way to pack five years' worth of already elevated gains into one 12-month period.

"Our market has changed and there is no road map for this. We are flying by the seat of our pants," said Dana Cottrell, a Realtor at Summit Resort Group in Dillon.

Silverthorne has seen price gains in the 23% range, while gains in Frisco and Dillon are approaching 22%, and Breckenridge is in the 21% range, according to the Zillow Home Value Index for those areas.

Historically, the market in Summit County was about a third local buyers, a third Front Range buyers and a third out-of-state. Since the pandemic, it has swung to 40% Front Range buyers, including more remote workers and people pooling their resources to buy a vacation home.

"We have seen a dramatic increase in the amount of Front Range people who are buying in Summit County," Cottrell said. "If you can be at home and looking at Baldy Mountain or Lake Dillon while you work, it is pretty sweet."

It also appears that some Front Range buyers who can't afford to go high up in the mountains are trying to satisfy their ambitions closer in.

Metro Denver's leaders for home price appreciation are all up in the Jefferson County foothills, places like Idledale, up 26.5%; Indian Hills, up 23.5%, and Kittredge, up 22.8%. Likewise, Boulder County's biggest gainers are on its western periphery, with Ward up 22.5%; Nederland up 20.9%, and Jamestown up 20.2%.

Still more demand than supply

Phyllis Resnick, executive director of the Colorado Futures Center at Colorado State University, said the shift to more rural and remote areas is definitely a trend, but she questions whether it will have staying power long-term.

More isolated areas tend to lack active new home construction. When more buyers show up, prices can surge and gains off smaller values can look huge, even if they are still manageable. The more fundamental problem, one that was an issue before the pandemic, and one that will remain so after it passes, is an inadequate supply of homes.

"We still have so much demand in excess of supply," Resnick said. That shortfall is not only contributing to rising home prices but also rising rents, squeezing those who are priced out of the purchase market and unable to lock in a fixed monthly payment.

Another related study by Lawson found that of the housing markets with the biggest price gains, 92% were already unaffordable to renters, while only 18% were unaffordable to existing homeowners. It is renters who in the end may get squeezed harder by the massive home price gains.

About 22 ZIP codes in the state saw prices fall over the past 12 months. They include some areas dependent on coal production, and places not on the tourism radar. Eagle County also lagged other mountain resort areas. Its weakness was primarily concentrated in places like Eagle and Gypsum, which saw home price depreciation, and not in Vail and Avon, which were up 15.3% and 9.4% respectively, according to the analysis.

Tucker said the pace of appreciation seen earlier this year can't be maintained, and it is looking more and more likely that gains, especially in metro Denver, peaked out this summer.

"Things are already beginning to moderate, and we expect that trend to continue as inventory finally recovers and the market moves toward a better balance between buyers and sellers," he said.

Gains will slow, but he doesn't expect them to return to the average pace just yet and Zillow is forecasting another year of double-digit gains in metro Denver, Colorado Springs and Fort Collins.