Thursday, April 21, 2011

Analysis: 1st Q 2011 Vacancies and Rents in Colorado Springs metro area

According to new Colorado Springs vacancy and rent data released today by the Colorado Division of Housing, multifamily rental vacancies fell while average rents increased.

The region-wide vacancy rate in Colorado Springs has fallen every quarter for the past eight quarters when compared to the same quarter a year prior. As can be seen in the first graph, the year-over-year change in vacancies has not been positive since the first quarter of 2009, when the vacancy rate rose 30 percent over the year prior.

Graph 2 shows the vacancy rate for the Colorado Springs area for each quarter during the last ten years. 2011's first-quarter vacancy rate, which is tied with the second quarter of 2010 at 5.8 percent, is the lowest vacancy rate reported since the third quarter of 2001. Colorado Springs is just now recovering from ten years of high vacancy rates and stagnant rents. This period was touched off by the mobilization of large numbers of troops stationed in Colorado Springs, and was further reinforced by a decade of aggressive home buying which cut the demand for rental housing. The Colorado Springs area also endured several mass layoffs during the last decade.

Not unexpectedly, growth in average rents has begun to build in the region as well. Notably, the average rent for the Colorado Springs area has not decreased since the third quarter of 2009. In each quarter since, the average rent has been flat or has increased from each quarter to the next, creating the longest period of sustained rental increases in ten years.

The region-wide average rent in Colorado Springs has increased for the past five quarters when compared to the same quarter the previous year. As can be seen in the fourth graph, the past three quarters have shown growth rates near or above 4 percent which suggests the sort of growth in average rents seen in Colorado Springs before the 2002 recession hit Colorado.

While the recent growth in rents and the declines in vacancy rates does not in itself prove continued demand for multifamily rentals in the region, the absence of any substantial amount of new construction of rentals in the area will contribute to ongoing rent growth and tightness in vacancies. Barring a large mobilization of troops out of the area, there will be sufficient population to sustain continued demand for rentals.

In addition, the relative unattractiveness or lack of accessibility to for-purchase housing at this time will reinforce this trend.

Note: The average rent information above is not adjusted for inflation. For information on inflation-adjusted rents, see here.

The vacancy and rent report also contains information on median rents. For more information on the differences between median and average rents, see here.