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- Rental vacancies high, vacancies low.
- However, real rates lower than nominal rates.
- Mortgages can be less expensive than rental costs.
In inflation-adjusted dollars, Denver-area renters typically are paying less today for an apartment than they were a decade ago.
But that is little consolation to today’s renters, who paid an average of $978.99 a month of rent in the Denver area at the end of the fourth quarter of 2012, according to an apartment report released Thursday
That is about 5 percent more than the average rent of $932.02 in the fourth quarter of 2011.
The all-time high rent, in nominal, or non-adjusted rental dollars, occurred in the third quarter of 2012, when the average rent was $988.42.
However, rents almost always drop in the fourth quarter from the third quarter for seasonal reasons, noted Ron L. Throupe, a business professor at the Daniels College of Business at the Burns School of Real Estate and Construction Management at the University of Denver.
In 2002, the average monthly rent in the Denver area was about $800, said Ryan McMaken, of the Colorado Division of Housing, one of the sponsors of the report. When adjusted for inflation in 2012 dollars the real rate, or when inflation is factored in, is equivalent to $1,021 per month.
“Of course, it’s not the same renters today as it was 10 years ago,” said McMaken, said.
“That does not mean squat,” to current renters that on paper, they are getting better a better deal in the current market than they were a decade ago, he added.
Because interest rates are so low, in one way it is surprising that rents are so high, said Jerry Kendall, a veteran apartment broker and finance expert, who has launched a new firm, Multifamily/Capital Advisors.
“In the past, when interest rates came down, apartment owners passed on some of the savings to their renters,” Kendall said.
“You don’t need to cut rents in today’s market, where there is no vacancy and no alternatives,” Kendall said. “That is bad news for renters, but good news for landlords.”
The overall vacancy rate at the end of last year was 4.9 percent, compared with 5.4 percent at the end of 2011. The vacancy rate was 4.3 percent in the third quarter of last year.
Peter Niederman, CEO of Kentwood Real Estate, recently noted that it is interesting that in the Denver-area, both rentals and the housing markets are strong.
Often, the rental and housing markets move in opposite directions.
“This happened in the ‘90s, too, during the tech boom,” said McMaken. “Both the for-sale housing market and the rental markets were rising.”
However, during that part of the real estate cycle, many renters were planning to buy.
“One reason, is back then renters saw homes as an investment and a way to create wealth,” Kendall said. “That has not the case in recent years,” when many home owners saw the value of their houses decline during the recession.
Still, he said owning a home in some geographic areas in the metro area, the monthly cost of owning a home can be less expensive than renting.
“I live in Stonegate in Parker, and with interest rates being so low, you can buy a home in Parker and have a mortgage around $1,200,” Kendall said.
“If you want to rent a nice apartment in the Douglas County area, you are going to be paying around $2,200 to $2,400 a month. That is quite a spread.”
However, it is harder to qualify for a mortgage than in the past, and some renters, because of financial downturns during the recession, may not have the needed credit and down payment to get a mortgage, Kendall said.
“And, you should probably plan to stay in your house for five or six years in order to recoup the closing costs,” McMaken said.
Interested in finding a rental or putting a home in a rental pool? Please visit 8z Rentals.
Have a story idea or real estate tip? Contact John Rebchook at JRCHOOK@gmail.com. InsideRealEstateNews.com is sponsored by Universal Lending, Land Title Guarantee and 8z Real Estate. To read more articles by John Rebchook, subscribe to the Colorado Real Estate Journal.
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