Apartment vacancy rate falls to 4.2%

Highlights:

  • Colorado Division of Housing releases 2Q apartment report.
  • Rental market booming despite low mortgage rates.
  • Apartment vacancies lowest since 3Q 2000

The apartment vacancy rate in the Denver metro area fell to 4.2 percent during the second quarter, dropping to the lowest vacancy rate recorded in any quarter since the third quarter of the year 2000, according to a report released Wednesday by the Apartment Association of Metro Denver and the Colorado Division of Housing.

The metro Denver apartment vacancy rate was down from 2012’s second-quarter rate of 4.8 percent, and was also down from the first quarter rate of 4.6 percent.

For the past 15 quarters, the vacancy rate has fallen when compared to the same quarter one year earlier. The last time the quarterly vacancy rate rose year over year was during the third quarter of 2009.

From the second quarter of 2012 to the same period of 2013, the vacancy rate dropped in Adams, Arapahoe, Denver, Douglas, and Jefferson counties.

During the same period, the vacancy rate rose in the Boulder/Broomfield area, but remained very low at 3.8 percent in that region during the second quarter of this year.

Apartment demand strong despite low mortgage rates

“In spite of very low mortgage rates for home buyers, renting apartments remains a very attractive option for many households,” said Ryan McMaken, and economist with the Colorado Division of Housing.

“The demand for real estate in the metro area remains solid as well due to a stable employment situation and demographics that point toward continued population growth.”

As vacancy rates moved down, the area’s average rent increased. During the second quarter of 2013, the average rent in metro Denver rose to $1,022, increasing 4.3 percent, or 43 dollars, from 2012’s second-quarter average rent of $979.

When adjusted for inflation, however, the average rent has not yet returned to the all-time high reached during the third quarter of 2001. Following the dot-com bust, inflation-adjusted rents fell from late 2001 through 2007.

“The good news for renters is there are an estimated 15,000 new units in the pipeline,” said Mark Williams, Executive Vice President for the Apartment Association of Metro Denver. “These new units mean new competition which will keep rental rates in check.”

The average rent rose in all counties measured, with the largest increases found in Douglas County and the Boulder/Broomfield area where the average rents grew year over year by 9.8 percent and 9.4 percent, respectively. The county areas with the highest average rents were Douglas County and the Boulder/Broomfield area where the average rents were $1,1242 and $1,194, respectively. Adams County reported the lowest average rent at $933.

Second-quarter vacancy rates by county were:

  • Adams, 3.8 percent.
  • Arapahoe, 4.5 percent;.
  • Boulder/Broomfield, 3.8 percent.
  • Denver, 4.6 percent.
  • Douglas, 2.9 percent.
  • Jefferson, 3.7 percent.

Average rents for all counties were:

  • Adams, $933. Arapahoe, $979.
  • Boulder/Broomfield, $1194;.
  • Denver, $1,025;.
  • Douglas, $1,242;.
  • Jefferson, $1,003.

Have a story idea or real estate tip? Contact John Rebchook at  JRCHOOK@gmail.com. InsideRealEstateNews.com is sponsored by Universal LendingLand Title Guarantee and 8z Real Estate. To read more articles by John Rebchook, subscribe to the Colorado Real Estate Journal.

 

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John Rebchook

John Rebchook has more than 30 years of experience in writing and communications. As the Real Estate Editor for the Rocky Mountain News, he wrote about residential and commercial real estate for 26 years. He has won numerous awards for business stories and columns that he wrote, both as an individual and part of teams. In addition to real estate, he also covered economic development, banking and financing, the airlines, and cable TV for the Rocky. In addition, he was one of the original freelance writers for GlobeSt.com, covering commercial real estate for the Internet publication.

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Comments

  1. “When adjusted for inflation, however, the average rent has not yet returned to the all-time high reached during the third quarter of 2001. Following the dot-com bust, inflation-adjusted rents fell from late 2001 through 2007.”

    Precisely. There’s plenty of room for rent growth from here.

    • Sorry DJ, as much as you and your magic 8 ball think rental rates have been and will continue to rise 10%+ you are completely wrong! Although, if you keep wishing for it to happen, it just might.

      • They certainly could. From 1992-2000, prices for apartment buildings increased about 10% annually, this while lots of new product was continously coming to market and interest rates were rising.

  2. I know you don’t think interest rates, rents, and prices can all rise at the same time, but i assure you, it not only can happen, but it will this time as well.

    • I never said that it can’t happen. If we have 10%+ you will see higher rates, prices and rents. I don’t think the US will see 10%+ inflation. It’s really difficult to see inflation in real estate/rents without wage growth(not just in the top 10% of wage earners).

    • What do you expect form a commercial real estate company’s report? When was the last forecast from NAR correct?

      • There isn’t a single source that denies that the Denver apartment market is booming. What’s your take? I assume you didn’t anticipate this two years ago? Am I correct?

        • No, two years ago when your were saying rents would go up yearly by double digit I was saying rents would not rise so fast. I believe I said 2-5% max. Yes, cap rates are very low right now(mostly due to low interest rates). When rates rise, cap rates will need to rise as well. If rising rents can keep pace, prices will fall. You can’t have a 4-cap with the 10 year at 4%.

          • Wrong again. In 2007 there were 4 caps everywhere accross the country with the 10 yr above 5%.

          • Obviously you didn’t do your homework and made another false statement. Welcome to the real world once again.

          • In the real world fear and greed force prices way up or down beyond what any economist thinks possible. There are many variables that you are leaving out when you make your assumptions. With many years of investing experience I’ve become better and better at including all variables and making more accurate projections. Your comments prove that you don’t understand all these variables.

          • DJ, I’m just providing you information from Fannie Mae who is by far the largest credit provider for muti family lending. They underwrite loans based on real world criteria and typically don’t use a magic 8 ball. You made a comment sayin in 2007 there were 4 caps all over the country and that comment is unfounded. The “real word” I much larger than the 4-plexs you own. I’m sure you and your magic 8 ball know much more than the largest credit facility of multi family units when it comes to the real world.

          • They certainly were not the largest for multifamily in 2007. Again, other factors at work at that time that defy the models.

          • FYI DJ-as bad as these deal were, their cap rates were well over the 10-year at the time(at least 150 bps above).

        • DJ, you really should just stop posting on this subject. You are really showing your ignorance on this subject. Fannie Mae was head deep in multi family financing. The were in 1st position in many of the largest sales in 2006-2007. Investment banks were in a mezz or equity position. Here is an example of one of the worst deal during 2006-2007. It’s a text book example of a too low cap rate and future expectations never coming to fruition. Fannie was all over this one.

          Stuyvesant Town and Peter Cooper Village.

          http://www.nytimes.com/2010/01/26/nyregion/26stuy.html?pagewanted=all

    • What do these have to do with your incorrect statement that “You can’t have a 4-cap with the 10 year at 4%.”?

      • I provided you information from Freddie Mac showing the minimum cap rate spred they used to make loans was to treasuries in 2007 was 166bps above the 10 year(see page 3). Then you said Fannie and Freedie were not a large part of financing in 2007, I pointed out to you they financed billions of dollars that year in some some the biggest transaction EVER in muti family. I’m sure there is some mom/pop or 4-plex cash buyers stupid enough to buy a cap rate lower than the 10 year, but that’s not what we are talking about. As usual, you provide nothing to substantiate your position other than you have been doing this a long time and you and the magic 8 ball are real estate gurus.

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