John Rebchook is a former Rocky Mountain News reporter with more than 30 years of experience in writing and communications... Vacancies for-rent condos, single-family homes, and other small properties across metro Denver fell year-over-year to 3.8 percent during the second quarter, shows a state report released today. According to a report released by the Colorado Department of Local Affairs’ Division of Housing, the vacancy rate was 5.2 percent during the second quarter of 2009, and was 3.1 percent during the first quarter of this year. The second quarter’s vacancy rate is the lowest second-quarter rate reported since the report was started in 2003.
The trend of low vacancies and rising rents likely will continue, experts said today.
“There’s been a lot of conversation about multi-family (apartment) rentals growing in popularity, but that is true about rental, single-family homes, too,” said Gordon Von Stroh, a University of Denver business professor and author of the report. Von Stroh said that the population grows, there are not enough new apartments being built to meet the demand, while at the same time new-home construction is a fraction of what it has been when measured by historic levels.
Also, many people who lost their homes either through a foreclosure or a short sale – when a bank accepts less than the mortgage amount – rent another house, instead of an apartment, said Robert Alldredge, principal of Jericho Properties, a residential property rental company in Lakewood. Inded, three and four bedroom homes have the lowest overall vacancy rates, he said, because they can accomodate families. In some cases, they may even include “extended families,” such as grandparents living under one roof with their childrens’ families, he said.
The lowest vacancy rates were found in Arapahoe County and Douglas County, both of which reported average rates of 2.9 percent. The highest vacancy rate, likely driven by rental houses left behind by students during the summer break, was 8.6 percent in the Boulder/Broomfield area.
Vacancy rates for all counties surveyed were: Adams, 4.2 percent; Arapahoe, 2.9 percent; Boulder/Broomfield, 8.6 percent; Denver, 3.4 percent; Douglas, 2.9 percent; and Jefferson, 3.3 percent.
Rents rise
The average rent for single-family and similar properties rose year-over-year to $1027.78, rising from 2009’s second-quarter rate of $1016.35. The second quarter’s average rent was down from this year’s first quarter average rent of $1035.56.
“In general, average rents continue to go, up, but not at a rapid pace,” said Ryan McMaken a spokesperson for the Colorado Division of Housing. “With such a low vacancy rate, we’d expect to see more rent growth, but the employment situation is putting some downward pressure on rents.”
Relucant landlords not making money
Property manager Alldredge, however, said few people renting houses are making a killing – or even a profit. An increasing number of people are putting their homes into rental pools, because they can’t afford to bring a check to the closing table, if they were to sell them for a loss. They are known as “reluctant landlords,” who intend to sell their homes as soon as the market improves.
“If a fix-and-flipper bought the home during the last 18 months, they’re probably doing OK,” Alldredge said. “If they paid cash, they’re obviously doing fine, renting it. And if they have an 80 percent loan, they’re probably also doing fine. Everyone else is probably losing money. They’re just not taking as big of a monthly hit as they would if they had to cover their entire mortgage amount.”
People who lose their homes in foreclosure, or in a short sale, typically have had their credit damaged too much to buy another house, despite record-low mortgage rates, he said. “They’re actually making people qualify for a mortgage now,” Alldredge said. “There are people out there who qualify; there are just a lot fewer than in the past. And those who can qualify are just afraid to death to buy, which is why home sales are way down. So they end up renting.”
Average rents for all counties were: Adams, $1094.98; Arapahoe, $999.50; Boulder/Broomfield, $1518.43; Denver, $962.91; Douglas, $1415.34; and Jefferson, $975.25.
The average number of days on the market for single-family rentals and similar properties fell from 54.7 days during the second quarter of 2009 to 47.2 days during the second quarter of 2010., a 13.7 percent drop. The number of days on the market rose from 2010’s first quarter average of 45.1 days. Condo rentals, however, typically spend 88 days on the market, as there is not as much renter demand for them as there is for houses, Allredge said.
The Colorado Statewide Vacancy and Rent Study is released each quarter by the Colorado Division of Housing. The report is available online at the Division of Housing web site:http://dola.colorado.gov/cdh.
Contact John Rebchook at JRCHOOK@gmail.com.
Good news for those of us who own rental properties and smart investors. The next wave as the rentals dry up and rents increase will be for previously owned home sales to pick up because as stated in the article new builds have been down for a while and the new build pipeline is only in the beginning phases of getting going again. It is a good sign.