Apartment vacany rate at 4.6%

Highlights:

• Apartment vacancy rates fall for 14 consecutvie quarters.
• Construction activity not enough to meet demand.
• Inflation-adjusted rents at 9-year high.

The apartment vacancy rate in the Denver metro area fell to 4.6 percent during the first quarter, dropping to the second-lowest vacancy rate recorded in any quarter since the first quarter of 2001, according to a report released today.

Meanwhile, rental rates have reached an all-time high, when not adjusted for inflation. Rents have risen so much, at a time when mortgage rates are at historic lows. Some real estate experts contend that makes a compelling case for buying instead of renting.

The vacancy rate was down from 4.9 percent in the first quarter of 2012 and was also down from last year’s fourth-quarter rate of 4.9 percent, according to the report by the Apartment Association of Metro Denver and the Colorado Division of Housing,

For the past 14 quarters, the vacancy rate has fallen when compared to the same quarter one year earlier.

“This is another quarter of rent growth overall and it’s  a rebound from the expected sag of the fourth quarter,” said Ron Throupe, a University of Denver professor and the author of the report.

“Although we are having new units built there is not a glut as vacancy is again down,” Throupe continued.  “The current quarter compares favorably even to other historic times when new units were in the neighborhood of 6,000 units per year.  There may be pockets or submarkets where new supply is challenging, but not at the overall market level. It is a time going forward where attention to submarket supply and demand will dominate.”

The last time the quarterly vacancy rate rose year over year was during the third quarter of 2009.

From the first quarter of 2012 to the same period of 2013, the vacancy rate dropped in Arapahoe County, Jefferson County, and the Boulder Broomfield area. The rate rose in Adams, Denver and Douglas counties during the same period.

“The number of new apartments delivered has increased rapidly since 2010, but the numbers haven’t been large enough so far to push vacancy rates up significantly,” said Ryan McMaken, an economist with the Colorado Division of Housing. “We do see some submarkets where vacancies are temporarily up as new communities lease up, but that’s not indicative of a decline in demand.”

Rens increased to the highest level recorded in any quarter, as vacancies moved down. During the first quarter of 2013, the average rent in metro Denver rose to $992, increasing 4.2 percent, or $40, from the average monthly rate of $952 in the first quarter of 2012.

The average rent rose in all counties measured except Adams County, with the largest increases found in Douglas County in the Boulder/Broomfield area where the average rents grew year over year by 6.9 percent and 7.4 percent, respectively.

The county areas with the highest average rents were Douglas County and the Boulder/Broomfield area where the average rents were $1,186 and $1,150, respectively. Adams County reported the lowest average rent at $910.

“Rent growth is solid, and even when adjusted for inflation, the average rent is almost to a nine-year high,” McMaken said.

First-quarter vacancy rates by county were:

• Adams, 5.2 percent.
• Arapahoe, 4.1 percent.
• Boulder/Broomfield, 3.2 percent.
• Denver, 5.4 percent.
• Douglas, 6.5 percent.
• Jefferson, 3.7 percent.

Average rents for all counties were:

• Adams, $910.
• Arapahoe, $950.
• Boulder/Broomfield, $1,150;.
• Denver, $1,008;.
• Douglas, $1,186;.
• Jefferson, $958.