Earlier today I posted a blog that showed the overall Colorado vacancy rate at the end of 2009 was 7.9 percent from 8 percent at the end of 2008, and the average and median rents were down slightly during the same time period.
“Statistically it is unchanged from a year ago, although two years ago the vacancy rate stood at 6.6 percent,” said Gordon Von Stroh, the University of Denver business professor who authored the report for the Colorado Division of Housing.
The monthly average rent for the entire state was $839.81, compared with $851.81 a year earlier, a 1.4 percent drop. The median rent fell 1.8 percent to $782.53 from $797.23, although there were wider swings in vacancies and rents in places such as Grand Junction and Pueblo. Renters also can expect a large number of incentives in those beaten-up markets, while landlords in tighter markets such as Fort Collins are providing very few incentives, Von Stroh said.
“The overall apartment market for the state has been largely stable, both in terms of rents and vacancy rates,” said Ryan McMaken, spokesman for the housing division. “It’s not like after the 2001 downturn, when we immediately started to see a 10 percent increase in vacancies,” and a drop in rent price.
Terrance Hunt, an apartment broker with the Denver office of Apartment Realty Advisors, said that leads him to be very bullish on the outlook for the apartment markets in the Denver area and throughout most of the state.
“If you look at the supply (of apartments) in 2001 and the supply today, you can see that we never fully recovered from 2001 (with the Sept. 11 terrorist attacks and the tech wreck),” Hunt said. “So we did not experience the over-building that took place in other markets across the country. It all comes back to the supply. We are not seeing much come out of the ground, and yet our population continues to grow. Sure, people are doubling up right now and moving back with their parents, but that is a short-term fix. Right after 2001, we have been absorbing an average of about 5,000 units per year, and much of that was during the subprime crisis, when everyone was able to buy a house. Now that home ownership levels are coming down and it is more difficult to qualify to purchase a house, we are going to see a flood of people renting apartments. And because of the lack of supply, we are going to see a huge run up in demand, with nothing coming on line in 2011.”
Von Stroh’s response?
“I agree 100 percent,” he said. For example, he said there are only 7,800 units available in the Denver area “and we’re putting out 30,000 high school graduates,” a year. Many of those who do not immediately go to college, will be looking to rent their first apartments, he noted. “At some point, the parents kick the kids out of the house,” he joked.
Still, Von Stroh said he worries about the direction of the entire economy, and how that will impact not only apartments, but the entire Colorado economy.
“In Colorado, I do think that we will see unemployment in 2010 go down a little bit,” Von Stroh said. “But a lot of that depends on external factors that we cannot control such as the national economy and the international economy. I do not see a lot of psychological momentum and the federal government is not doing enough to encourage growth in the business sector. So until that kind of cultural and environmental changes take place, I think the overall economy could remain in the doldrums.”
Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865.