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Apartment Vacancy Rates Decline in Denver Area

This on-line source for Colorado and Denver real estate markets frequently opines on the investment opportunities for apartment and other residential income properties. Apartment vacancies are declining and rental income is improving in most areas in and near Denver. Broomfield, Colorado is a northern suburb which is indicative of the overall market. The Broomfield Economic Development Corporation reports on 3,309 apartments. The BEDC recently reported quarterly vacancy rate trends as follows:

	Vacancy Rate
June 2005	13.5%
September 2005	10.2%
December 2005	10.5%
March 2006	7.7%
June 2006	5.6%
September 2006	2.7%

Posted by Steve Hewson - Denver Metro Real Estate on 11/12/2006 05:02 AM

Comments (16)

denver, apartments, colorado, real estate, investment, broomfield

This post has been included in Colorado Information

16 Comments on Apartment Vacancy Rates Decline in Denver Area

NOV

2006

Good news! The pendulum is swinging and we are going to be just fine! Good post.

Your opinion and comment is valued. Thanks.

Yesterday I was working with a young couple who's rent will increase $250 a month when their current lease expires in January. Of course this raise has inspired them to purchase, as will many others who are experiencing this in the Denver metro area.

The bottom will fuel the top...get ready for the climb!

Kristal,

I love the story of your couple and how increasing rents will move people to buy. Is it O.K. if I quote you in a future blog on the forecast of residential sales Denver sales?

Steve

Sure it's ok to quote me. I was going to blog about your report...so I guess we can tie the two together!

Cheers,

Interesting.

With rental vacancies that low, all of the investment buyers who purchased properites intending to flip, but got in too late, will now probably rent.

Lenn

Lenn,

Good point. This could create some opportunity for them as well. I think particularly of the condo owners who have been unable to sell and move up. As the renters have their rent increased they may be looking to move next to a condo. Some of my clients and friends will be happy when that happens.

Steve

Wow, that's quite a change. What specific changes are causing this in your market? I don't believe that your building starts have slowed any in the last couple of years.

Rich, Thanks for asking. Our local economy has finally started coming back in 2005-06 after 9/11. The Denver Metro area has created about 25,000 jobs last year and again this year. Unemployment is around 4.2% now. Because of the previous slow job market, people, particularly young college and high school graduates have stayed home longer and saved their money. Now that jobs are improving, they are taking the step out from the next. As mentioned by Kristal in an earlier comment on this blog, the next step will be to move into homes, so we are optimistic on the market. What you say about building starts is true for the single family residential and condo market. It has been overbuilt, but the building of apartments had come to a virtual standstill in recent years due to the high vacancies and low rents. Now, investors are moving into the market from California to buy and build apartments. I have another blog I'm working on that should explain this later in the week. Or maybe I just wrote it. Whoops! Steve

Steve, thanks for the very informative explanation. I used to travel to the Denver area often in another life. It's been fascinating to watch the growth that's taken place there, especially in the corridor between Denver and the Springs. Thanks!

NOV

2006

Hey Steve,

I did a blog back to you. The Investors are coming...

Check it out!

NOV

2006

you all are looking at this data wrong.

The rental vacancy rates are going down is because people can't afford to buy homes and potential buyers are waiting on the sidelines because they know that the Denver real estate is about 20-30% over priced. Meaning, expect Denver to have a 20-30% correction, which in turn could collapse on itself, meaning all those people with ARMs (40%..ballpark figure of people whom bought in past 3 years), will really have trouble with their ARMs if there house goes down in value. This is already happening.. why do you think Colorado is #1 in the nation on foreclosures.

In any case, I would rather rent and have a rent increase at $200/year, knowing I can wallk away at anytime and possibly be able to find cheaper rent. Rather than, buy an overpriced house that some seller is asking an unrealistic amount of money for, and once I buy that house, it will lose value in the coming years, due to the coming correction, and I would then be underwater oweing more money on a house than what its worth.

Also, some of these "flippers" may be not be able to sell, then they will rent and dilute out your market...

man..

SAS

besides, this data set only represents Broomfield.

What do other parts of the Denver area look like, or is it just so happens to be that Broomfield has really cheap rent, which is drawing people towards it...

SAS

"Our local economy has finally started coming back in 2005-06 after 9/11"

your job growth has come from 2 places: Walmart, King Soopers, and government jobs, and government construction jobs (i.e T-rex).

This isn't exactly an econimical rebound....

How many people at WalMart & King Soopers can afford a house in the Denver area? I have the answer..... ZERO.

man alive.....

SAS

"The bottom will fuel the top...get ready for the climb!"

wow, we are nowhere near the bottom. You think RE is slow now, wait till 08....

wow

SAS

NOV

2006

To SAS -

Your perspective and my perspective are what makes what we call a "market." My perspective at this time is that the market has been so beaten up and the news media and naysayers continue to think it is a bad market. I am believe in contrarian investing and buying when everyone thinks it is so bad that it can't get much lower. I believe those who buy in the next 12 to 24 months and can hold for 5 or more years will make money. Those who want 100% financing and don't want to put 20 to 25% down should be careful. Those whose circumstance may be changing in the next 5 years, such as job relocation, a delining job market in their industry, kids going to college, divorce, etc. should'nt be investing because they may need to sell. The apartment vacancy rates are seriously declining in the Denver area and large REITS are moving in and paying for the large apartment buildings and raising the rents because they can. I chose to support my vacancy rate conclusion because I saw some interesting data from Broomfield that supports the other data on vacancy rates. I am rather passionate about investing in real estate. It has done well for my clients and myself since 1980 if invested at the right times. I'm betting on my contrarian point of view, but understand you and others will disagree. We all have to sleep at night and not worrying about a stock investment is my preference as others don't want to worry about a real estate investment. I hope 2007 will be a good year for all, no matter our points of view.

Steve

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