For the past nine 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 fourth quarter of 2010 to the same period of 2011, the vacancy rates dropped in Adams, Denver, Douglas and Jefferson counties. Vacancies rose in Arapahoe County and in the Boulder/Broomfield area.

Renters hunting for lower rates

“Vacancies continue to decline year over year as demand grows faster than the production of new rental product,” said Ron Throupe, professor of Real Estate at the Burns School of Real Estate and Construction Management at the University of Denver, and the report’s author. “However, since the third quarter of 2011 we’re seeing some additional frictional vacancy as tenants move around in response to rising rents.”

As vacancy rates moved down, the area’s median rent increased. During the fourth quarter of 2011, the median rent in metro Denver rose to $870, increasing 2.8 percent from 2010’s fourth-quarter median rent of $846.

The median rent rose in all counties measured, with the largest increases found in Denver County and in the Boulder/Broomfield area where the median rent grew year over year by 3.4 percent and 3.7 percent, respectively. The county areas with the highest median rents were the Boulder/Broomfield Area and Douglas County where the median rents were $993 and $1,046, respectively. Denver County reported the lowest median rent at $834.

“The overall median rent in the Denver area has now increased year over year for eight quarters in a row, and the median rent has increased by almost 60 dollars over that time,” said Ryan McMaken a spokesman for the Colorado Division of Housing. “The rent growth we’re now seeing is more robust than what we saw during the last expansion between 2002 and 2008.”

Rental losses due to concessions, discounts and delinquencies fell to a ten-year low, dropping to 8.8 percent during the fourth quarter of 2011 from 2010’s fourth-quarter rate of 9.8 percent. Fourth-quarter rental losses have not been lower since 2002.

2011’s second-quarter vacancy rates by county were Adams, 5.3 percent; Arapahoe, 6.8 percent; Boulder/Broomfield, 4.4 percent; Denver, 4.8 percent; Douglas, 4.7 percent; Jefferson, 4.4 percent.

Median rents for all counties were:

• Adams, $873
• Arapahoe, $840
• Boulder/Broomfield, $993
•  Denver, $834
•  Douglas, $1046
• Jefferson, $836.

Contact John Rebchook at JRCHOOK@gmail.com

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“Vacancy rates remain near 10-year lows and the vacancy rate has dropped year-over-year for the past eight quarters in a row,” said Ron Throupe, Assistant Professor of business at the University of Denver, and the report’s author. “This is the second-lowest vacancy rate we’ve seen in any quarter since 2001.”

As vacancy rates moved down, the area’s median rent increased. During the third quarter of 2011, the median rent in metro Denver rose to $881, increasing 2.9 percent from 2010’s third-quarter median rent of $856. In Adams, Arapahoe, Denver, and Jefferson counties, and in the Boulder-Broomfield area, median rents increased. The county with the largest year-over-year increase in median rent was Denver County with an increase of 5.4 percent from $809 to $853. Among county-level markets, only Douglas County reported a decline in the median rent with a third-quarter year-over-year drop of 3.6 percent from $1,111 to $1,071.

“At 2.9 percent, annual growth in metro-wide median rents is still not reflecting large rent growth everywhere,” said Gordon Von Stroh, an advisor on the report at a professor of business at the University of Denver. “In some markets, of course, rent growth is very solid right now, but in some other less-desirable locations, and in areas with many B and C properties, a lack of rent growth is keeping that metro-wide median rent from really taking off.”

Rental losses due to concessions, discounts and delinquencies fell from 2010’s third-quarter rate of 13.6 percent down to 10.4 percent during the third quarter of this year.

“We’re starting to see concessions go away and all those offers for free rent are becoming rare as vacancies fall,” said Ryan McMaken, a spokesman for the Colorado Division of Housing. “Delinquencies are still an issue, though, as renters confront unemployment and declining wages.”

2011’s second-quarter vacancy rates by county were :

• Adams, 5.3 percent.
• Arapahoe, 5.6 percent.
•  Boulder/Broomfield, 4.7 percent.
•  Denver, 4.3 percent.
• Douglas, 3.8 percent.
•  Jefferson, 4.4 percent.

Median rents for all counties were: Adams, $886; Arapahoe, $844; Boulder/Broomfield, $991; Denver, $853; Douglas, $1071; and Jefferson, $837.

The full report is available through the Apartment Association of Metro Denver at www.aamdhq.org;  and limited information is available online at the Division of Housing web site: http://www.divisionofhousing.com.

Contact John Rebchook at JRCHOOK@gmail.com

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“The metro Denver vacancy rate is near the lowest it’s been in the last decade, but it’s essentially been flat for the last three quarters,” said Gordon Von Stroh, a professor of business at the University of Denver, and the report’s author. “It’s likely that weakness in the job market is keeping the vacancy rate from moving lower, but there is nevertheless enough demand to allow for some increases in rents.”

Median rents rise

As vacancy rates moved down, the overall median rent hit a non-inflation adjusted record high. During the first quarter of 2011, the median rent rose to $859, increasing 2.6 percent from 2010’s first-quarter median rent of $836. In individual market areas, the median rent rose year-over-year in all county-level regions covered by the survey. The region with the largest year-over-year increase in the median rent was the Boulder/Broomfield area with an increase of 6.6 percent from $901 to $961. The smallest increase was found in Denver County where the median rent rose 2.1 percent from $801 during 2010’s first quarter to $818 during this year’s first quarter.

“The growth isn’t nearly what it was before the 2002 recession in Colorado, but we’re looking at some of the strongest rent growth we’ve seen in metro Denver in the past decade,” said Ryan McMaken, a spokesman for the Division of Housing. “Year-over-year growth in median rents outpaced inflation during much of 2010, and the first quarter’s median rent is the highest yet recorded.”

As market rents generally increased over the past year, rental losses due to concessions, discounts and delinquencies fell slightly. Rental losses fell to 9.5 percent during the first quarter of 2010, dropping from 2010’s first-quarter rate of 9.7 percent.

2011’s first quarter vacancy rates by county were :

• Adams, 5.6 percent.
• Arapahoe, 6.4 percent.
• Boulder/Broomfield, 4.9 percent.
• Denver, 4.8 percent.
• Douglas, 5.3 percent.
• Jefferson, 4.7 percent.

Median rents for all counties were:

• Adams, $871.
• Arapahoe, $825.
• Boulder/Broomfield, $961.
• Denver, $818.
• Douglas, $1061.
• Jefferson, $828.

The Colorado Vacancy and Rent Survey reports averages and, as a result, there are often differences in rental and vacancy rates by size, location, age of building, and apartment type. The full report is available through the Apartment Association of Metro Denver at www.aamdhq.org. Limited information is available online at the Division of Housing web site: http://dola.colorado.gov/cdh/

Contact John Rebchook at JRCHOOK@gmail.com

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According to a report released Tuesday by the Apartment Association of Metro Denver and the Colorado Division of Housing, apartment vacancy rates fell 28 percent year-over-year from last year’s fourth-quarter rate of 7.7 percent. The vacancy rate rose slightly from 2010’s third-quarter rate of 5.3 percent, although the vacancy rate generally rises from the third quarter the fourth quarter as a result of seasonal factors.

Best market in a decade

“With the past two quarters showing vacancy rates around five-and-a-half percent, we’re starting to see a return to vacancy rates we haven’t seen for 10 years,” said Ryan McMaken, a spokesperson with the Colorado Division of Housing. “This can be at least partly explained by the fact that the number of new households formed has been steady, but the number of new rental units added to the market is at a 10-year low.”

Rents rising

As vacancy rates moved down, the area’s median rent increased. 2010’s fourth-quarter median rent rose to $846.36 from 2009’s fourth-quarter median rent of $811.32. In individual market areas, the median rent rose year-over-year in all county-level regions covered by the survey. The region with the largest year-over-year increase in the median rent was Adams County with an increase of 8.3 percent from $791.26 to $857.16. The smallest year-over-year increase was found in Douglas County where the median rent rose 3.2 percent from $1011.78 during 2009’s fourth quarter to $1043.79 during 2010′s fourth quarter.

“From 2001 to 2010, the median rent increased only 7.5 percent and wasn’t keeping up with inflation in the metro area, so rents were effectively going down” said Gordon Von Stroh, professor of Business at the University of Denver, and the report’s author. “As vacancy tightens we’ve started to see a few more increases in rents, however, and multifamily owners will undoubtedly now need to push rents in hopes of making up for those years of falling rents.”

Although market rents increased during 2010, rental losses due to concessions, discounts and delinquencies rose as well. Rental losses rose to 9.8 percent during the fourth quarter of 2010, rising from 8.7 percent during the fourth quarter of 2009.  2010’s first quarter vacancy rates by county were Adams, 5.7 percent; Arapahoe, 6.6 percent; Boulder/Broomfield, 3.6 percent; Denver, 5.2 percent; Douglas, 5.2 percent; Jefferson, 4.5 percent.

Median rents for all counties were: Adams, $857.15; Arapahoe, $829.84; Boulder/Broomfield, $957.92; Denver, $806.79; Douglas, $1043.79; and Jefferson, $823.47.

Contact John Rebchook at JRCHOOK@gmail.com

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In the second quarter, the vacancy rate stood at 6.1 percent, according to the report by the Apartment Association of Metro Denver and the Colorado Division of Housing. In the third quarter, the apartment vacancy rate is the lowest it has been since the third quarter of 2007. Rates have now fallen for three consecutive quarters.

In the past, demand for apartments has tracked closely with job creation, but in recent quarters, demand has been strong in spite of job losses.

Vacancies at pre-recession levels

“The last time vacancies fell to 5.3 percent in the metro area, Colorado was at the height of the recovery that followed the 2002 recession,” said Ryan McMaken a spokesperson for the Colorado Division of Housing. “Total employment in Colorado is still down quite a bit from the 2008 peak of the market, so the fact that vacancies are back to those levels shows that demand for apartments is looking pretty resilient right now.”

Vacancy rates had initially increased following the rapid increase in the unemployment rate in late 2008 and early 2009, rising to 9.0 percent. But the vacancy rate quickly fell below eight percent by the end of 2009, and is now at a three-year low. The last time the metro-wide vacancy rate fell below 5.3 percent was during the first quarter of 2001.

Rents increased for the third quarter in a row as the metro-wide average rent increased from $880.99 to $912.68, or 3.6 percent, from the third-quarter of 2009 to the same period this year. All counties in the metro area reported year-over-year increases in average rents. At 3.6 percent, growth in rents outpaced the most recent Consumer Price Index increase for the Denver area which was 1.7 percent for the first half of 2010.

Low wages pose problem

Tenants continue to see few wage increases, however, and this presents challenges for owners seeking rent increases.

“With consistent declines in vacancy, we’re starting to see some higher gross rent levels,” said Gordon Von Stroh, a professor of business at the University of Denver and the report’s author. “On the other hand, rental losses due to concessions are at the highest levels we’ve seen since 2007. A lack of income growth for tenants is still putting downward pressure on effective rents.”

Rental losses due to concessions, discounts and delinquencies rose to 13.6 percent during the third quarter of this year, rising from 10.8 percent during the third quarter of last year. Rental losses are at the highest level experienced since the first quarter of 2007 when rental losses were 14.3 percent of gross rents.

By the numbers

For 2010’s third quarter, the highest vacancy rates were found in Arapahoe County where rates fell year-over-year from 8.5 percent to 6.7 percent.  Rates were lowest in the Boulder/Broomfield area where vacancies fell year-over-year from 5.5 percent to 3.5 percent. With the exception of Douglas County, vacancy rates fell in all metro Denver counties from the third quarter of 2009 to the same period this year. The vacancy rate in Douglas County increased slightly year over year from 4.3 percent to 4.4 percent.

2010’s first quarter vacancy rates by county were Adams, 4.4; Arapahoe, 6.7; Boulder/Broomfield, 3.5; Denver, 5.3; Douglas, 4.4; Jefferson, 3.9.

Average rents for all counties were: Adams, $914.71; Arapahoe, $881.97; Boulder/Broomfield, $993.25; Denver, $905.01; Douglas, $1112.52; and Jefferson, $863.99.

Contact John Rebchook at JRCHOOK@gmail.com

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Following an unexpected drop in the third quarter, metro Denver apartment vacancy rates rose during 2009’s fourth quarter to 7.7 percent, about a 4 percent increase from the 7.4 percent vacancy rate in the third quarter. Average rents also rose.

Still, last quarter’s vacancy rate was about a 2.5 percent  drop from 7.9 percent at the end of 2008, according to a report released today by the Apartment Association of Metro Denver and the Department of Local Affairs’ Division of Housing.

“In general, we expect to see vacancy rates rise from the third quarter to the fourth due to seasonal factors, said Gordon Von Stroh, professor of business at the University of Denver and the report’s author. “But at 7.7 percent, we still see softness in the market.”

However, an analysis by InsideRealEstateNews.com shows that the third-quarter-t0-fourth-quarter increase was the smallest percentage increase since 2005. it was the lowest fourth-quarter vacancy rate since it stood at 6.1 percent in 2007.

Apartment market mending

And Von Stroh and other experts say that there are reasons to believe that Denver’s apartment market, considered one of the healthiest in the country, will show signs of getting even better. Rising unemployment, however, could put the brakes on the apartment market,

“Unemployment went up in the fourth quarter and when you overlay the apartment vacancies with the unemployment rate, there is a pretty strong correlation,” Von Stroh said. (See chart below.)

Still, he said demand will increase for multi-family units because of immigration, “natural population growth,  and because rents are not high enough to justify construction of new apartment communities, he said.

“It’s simple supply and demand,” Von Stroh said. “My only concern is a lack of job growth and rising unemployment. Otherwise, I am quite bullish.”

Unemployment, slow wage growth, concerns

Pat Coyle, head of the Colorado Division of Housing, agrees. “In December, unemployment in the Denver area rose for the first time since August,” and personal income growth has been less than 1 percent, Coyle said.  “This means that many renters will be doubling up and looking for ways to cut costs.”

Also, last year showed a positive absorption of 4,069 units, compared to negative absorption of 3,554 units in 2008. That means, in short, that more units were rented than vacated last year.

Absorption rate key

Terrance Hunt, an apartment broker with Apartment Realty Advisors, said the absorption number in some ways speaks more to the market than the vacancy rate.

“I think the absorption rate is extremely important,” Hunt said. “It shows that last year was a good, solid year, despite the tough economy.”

And much like the housing market, the Denver-area apartment market never became as over-built like other markets, such as Phoenix and Las Vegas, he noted. “One reason is that we never fully recovered from the tech-wreck in 2001,” said Lauren Brockman, principal of Orion Real Estate Services.

Rents steady

The average monthly rental rate was $875.39 in the fourth quarter, down from $888.81 a year earlier and down from $880.99. Brockman said rates typically need to rise about 25 percent before justifying new construction. The highest average rent was reported in Douglas County at $1027.15, and the lowest was reported inArapahoe County at $847.95. Average rents for all counties were: Adams, $809.39; Arapahoe, $847.95; Boulder/Broomfield, $943.23; Denver, $902.66; Douglas, $1027.15; and Jefferson, $848.75. When compared to the fourth quarter of 2008, only Douglas County and Jefferson County reported increases in overall average rents. Adams, Arapahoe, Boulder/Broomfield, and Denver counties all reported decreases in overall average rents.

“I think the public needs to know that they are really getting a good deal, as far as apartment rental rates,” Brockman said. “I think renters sometimes think they are paying too much.” But the reality, he said, is today’s market rates are very close to what you would pay for subsidized, government-backed housing, based on incomes and rents.

Foreclosures not helping apartments

Something else that might surprise many people is that rising home foreclosures are not helping the traditional apartment market. Von Stroh noted that if a family loses their home in a foreclosure, instead of leasing an apartment in a building, they will rent another home. “They need room for their kids and their dog,” he said.

Not only that, they don’t move far from the house that they lost, which Brockman argues is good for society, even if it doesn’t help fill vacant units in apartment buildings.

“The truth is, what happens after a single-family home foreclosure, is the family moves into a rental house down the street,” Brockman said. “That is good for society, because their children can stay in the same school.”

The irony is that they may be moving into a home that itself was a foreclosure, and now is owned by an investor.

Greg Bacheller, franchise  owner of Real Property Management Colorado, manages about 1,000 rental properties in the Denver area. About 50 percent of them are single-family homes.

Reluctant landlords abound

Typically, they are “reluctant landlords,” who can’t sell their home. Rather than take a $2,000 loss each month on their mortgage, they rent it out, absorbing a loss of a couple hundred dollars each month. “None of these people bought their homes with the idea of renting them out,” Bacheller said.

Other homes are foreclosures purchased by investors. “They can’t fix and flip anymore, so they fix and rent,” Bacheller said. However, as more homes are foreclosed, it will increase the size of the pool of home rentals, making it more difficult to raise rents. “The supply of (home) rentals will be increased by foreclosures,” he said. “But I do think that 2010 will be the year that supply and demand become very close to being balanced.”

Hunt said that the other thing to consider is that even with the extension of the federal tax credit until April 30 for first-time home buyers, it is harder to quality than ever, which means that home-buying will not rocket. That means that not only will more people be forced to rent, but fewer renters will become buyers.

“A couple of years ago, during the subprime craze, the main reason people left apartments was to buy a home,” Hunt said. “Now my mortgage broker friends tell me, “We have these federal tax credits and great interest rates, but no one can qualify.”

The highest vacancy rates were found in Denver County where rates rose year-over-year to 8.8 percent, and were lowest in Douglas County where vacancies fell year-over-year to 5.5 percent. During the same period, vacancy rates rose in Denver and Arapahoe Counties, and fell in Adams County, Douglas County, and in the Boulder/Broomfield area. Jefferson County reported no change.  Fourth quarter vacancy rates by county were Adams, 6.3; Arapahoe, 8.6; Boulder/Broomfield, 5.8; Denver, 8.8; Douglas, 5.5; Jefferson, 7.3.

In general, a vacancy rate of 5 percent is considered the “equilibrium” rate. Rates below 5 percent indicate tight markets.

DU Professor Gordon Von Stroh notes that unemployment and apartment vacancy rates

Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865.

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Vacancy rates hit 9 percent during the second quarter, the culmination of six quarters of consecutive rate increases, according to a report released late Tuesday  by the Apartment Association of Metro Denver and the Department of Local Affairs – Division of Housing. That is a 17.7 percent quarter-to-quarter drop. It also is the largest drop in vacancy rates from the second to third quarter since at least 2001.

Vacancy rates are now at the lowest rate since the third quarter of last year, when they stood at 6.5 percent. In other words, vacancy rates are still 13.85  percent higher than they were a year ago.

The recent declines in the unemployment rate may be having an effect on vacancies in the region.

“We know that vacancy rates tend to be sensitive to unemployment rates in Colorado,” said Gordon Von Stroh, professor of business at the University of Denver. “Unemployment peaked at 7.8 percent at the end of the second quarter, and slowly fell to 6.7 percent over the third quarter. The vacancy rate reflects this trend.”

Population increases have also buoyed the demand for housing.

“There’s still demand for rental housing because the population continues to grow in Colorado,” said Ryan McMaken, a spokesperson with the Division of Housing. “Over 30,000 new households were formed in Colorado during 2008, and even when job growth is not robust, new households translates into a demand for housing.”

Arapahoe County and Denver County tied for the highest county-wide vacancy rates at 8.5 percent, and Douglas County reported the lowest rate at 4.3 percent. From the third quarter of last year, to the third quarter of this year, vacancies increased in Arapahoe County, Denver County, and the Boulder/Broomfield area. During the same period, vacancies fell in Adams, Douglas, and Jefferson Counties. Vacancy rates for all counties surveyed were: Adams, 6.7 percent; Arapahoe, 8.5 percent; Boulder/Broomfield, 5.5 percent; Denver, 8.5 percent; Douglas, 4.3 percent; and Jefferson, 6.3 percent.

In general, a vacancy rate of 5 percent is considered the “equilibrium” rate. Rates below 5 percent indicate tight markets.

During the second quarter of 2009, average rents fell to $880.99 when compared to $892.22 from the third quarter of last year. The average rent during the second quarter of this year was $870.37.

In spite of falling vacancy rates, rent growth was limited. When compared to the third quarter of 2008, Only Arapahoe County and Douglas County reported increases in overall average rents. Adams, Boulder/Broomfield, Denver, and Jefferson counties all reported decreases in overall average rents.

The highest average rent was reported in Douglas County at $1058.13, and the lowest was reported in Jefferson County at $818.18. Average rents for all counties were: Adams, $848.22; Arapahoe, $862.16; Boulder/Broomfield, $951.11; Denver, $888.07; Douglas, $1058.13; and Jefferson, $818018.

“There’s still demand for rental housing because the population continues to grow in Colorado,” said  McMaken,.a spokesperson with the Division of Housing. “Over 30,000 new households were formed in Colorado during 2008, and even when job growth is not robust, new households translates into a demand for housing.”

The Vacancy and Rent Surveys are a service provided by the Apartment Association of Metro Denver and the Colorado Department of Local Affairs’ Division of Housing to renters and the multi-family housing industry on a quarterly basis.  The full report is available through the Apartment Association of Metro Denver and limited information is available online at the Division of Housing.

Year	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
2007	7.1%	6.2%	6.3%	6.1%
2008	5.9%	6.2%	6.5%	7.9%
2009	8.4%	9.0%	7.4%

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