Rental-home vacancy rates rose slightly to 1.6 percent in the first quarter from 1.4 percent a year ago, according to a state report released today.
The vacancy rate during the first quarter was the second-lowest vacancy rate recorded in any quarter since the survey by the Colorado Division of Housing was started in 2001. The first-quarter vacancy rate, however, was down from the fourth-quarter rate of 2.1 percent. The report tracks rental condos, townhomes, single-family homes and other small properties.
At the county level, the lowest vacancy rates were found in Douglas County and in Jefferson County where the vacancy rates were 1.3 percent and 1.0 percent, respectively.
The highest county-wide vacancy rate, found in Adams County, was 3.8 percent.
Vacancy rates for all counties surveyed were:
- Adams, 3.8 percent.
- Arapahoe, 1.9 percent.
- Denver, 1.7 percent.
- Douglas, 1.3 percent.
- Jefferson, 1.0 percent.
“With a vacancy rate below two percent, you’re essentially dealing with 100 percent occupancy,” said Ryan McMaken, a spokesman for the Colorado Division of Housing. “The vacancies we do see are due to little more than turnover, so this tells us that in most of the metro area, rental homes are filling up, and are doing so rather quickly.”
During 2012’s first quarter, the average number of days on the market for single-family rentals and similar properties was 28.7 days, which was the third-lowest average recorded since the survey was started in 2001. The number of days on the market during the first quarter was down from 29.7 days during 2011’s first quarter, and was also down from 2011’s fourth-quarter average of 38.9 days.
The average rent in metro Denver for single-family and similar properties rose to $1,056 during 2012’s first quarter, rising 1.6 percent from 2011’s first-quarter average rent of $1,039. This year’s first quarter’s average rent was down from 2011’s fourth-quarter average rent of $1,062. Average rents are not adjusted for inflation.
The average rent rose, year over year, in all county areas except in Arapahoe and Adams counties. Growth in the average rent was strongest in Jefferson County where the average rent grew 2.7 percent from 2011’s first quarter to 2012’s first quarter. The average rent fell the most in Arapahoe County where it was down 5.3 percent, year over year.
Average rents for all counties were:
- Adams, $1,046.
- Arapahoe, $1,003.
- Denver, $1,001.
- Douglas, $1,41.
- Jefferson, $1,020.
I guess all the landlord/REITS who thought rents were going to raise rents 10% last year are a little disappointed. Especially, in Arapahoe County. A vacancy rate of 1.9% and a 5% decrease in rents. We will have to see what this year brings. I’m guessing not much.
The vacancy rate is what is important, not the slow rise or small fall in rental income. I would rather continue to see my home rented without a break than nickle and diming my great tenants. Think of it this way – on a $1,000 per month rental, a 5% increase in rent equals $600 per year – that’s 2 months of loss for a vacancy. A vacancy cost much more than that – lost rent, repainting, advertising on and on. Have a good tenant – keep them and don’t worry about a few bucks in a rental price increase today.
Bob,
That is true unless you are a REIT using leverage with a 5 to 10 year term. They care a lot about the ability to raise rent in the future in order to offset debt service increases that will come. Potential rent increases are a big reason apartments are selling in the 5% cap rate range.
Also, without rent increases the value/price of apartment can’t rise. Cap rates are more affected by rent income than vacancy rate. If I have 100 units and I am able to raise rents 5%, I would be able to tolerate up to a 4.8% vacancy rate increase and still be better off. Believe me, raising rent is very important.
I don’t know how they conduct these surveys. I have never been included in one. My experience would tell me that average rents went up a lot more than the survey indicates. My guess would be that during the past year the bottom of the barrel properties that owners did not even try to rent in 2009 and 2010 were put into service during the past year and that dragged down the reported ‘average’ rent price increase from 2011 to 2012.