Thursday, August 9, 2012

Slideshow: Rent growth across Colorado, also inflation-adjusted rents.

Today we released the second quarter's vacancy and rent data for all metros in Colorado. For the first time since 2009, rent growth occurred year over year in all Colorado metros. The largest rent increases were found in Pueblo and in the Ft. Collins-Loveland area. All growth is measured in year-over-year comparisons.

The first graph shows year-over-year growth in all metro areas.

In eyeballing the graph, we see that the overall upward trend is clear in Metro Den and Ft. Collins. However, overall growth is still not as robust as it was in 2008 just before the financial crisis.

The second graph shows rent growth in the Ft. Collins-Loveland area. This is the most clear and robust trend in rent growth. Growth has exceeded 10 percent for the past two quarters, and was 12.8 percent during the second quarter. Much of this is due to a particularly strong job market.

The third graph shows the trend in Greeley. This is largely toward more growth, although growth has been moderating in recent quarters. The fundamentals point toward continued growth, however, unless unemployment worsens in the region. Apartment owners also benefit from proximity to the Ft. Collins area since, for some, Greeley functions as a more affordable bedroom community for workers in the Ft. Collins area. Greeley rents grew 1.9 percent during the second quarter.

The fourth graph shows rent growth in Grand Junction. There is not enough information here to pin down any definite trend, although the fundamentals in Grand Junction point toward continued rent growth if for no other reason than the fact that job growth is fairly stable, and virtually no new construction is taking place in multifamily in Grand Junction right now. GJ's multifamily market is still quite weak compared to what it experienced from 2004 to 2009 during a small oil boom that drove vacancy rates down to 1.5 percent for a time. The unemployment rate in Grand Junction remains above 9 percent. Rent growth during the second quarter was 6.9 percent.

The fifth graph shows the Pueblo market. Pueblo's second-quarter growth was very large with the average rent increasing 17.5 percent over the second quarter of 2011. This very large increase is largely a function of the fact that the average rent dipped significantly during the second quarter of 2011, before heading up again. There is a mild growth trend developing in Pueblo, considering the quarter-to-quarter numbers, but it is safe to regard the 17-percent increase as not indicative of an enormous growth trend in the works.

For metro Denver analysis, see here. For Colorado Springs analysis, see here.

The sixth graph shows the average rent for each metro area since 2002. Note that the Ft. Collins area rose above the metro Denver area for the first time last year. Pueblo, Greeley and Grand Junction remains the least expensive markets. There has been general growth in all markets over the past decade.

In the seventh, graph, however, I have adjusted the average rents for inflation and presented rents in constant 2001 dollars. When adjusted for inflation, only one market, Ft. Collins-Loveland is actually up from 2001 rent levels. All other metros show inflation-adjusted rents below 2001 levels as of 2012. Recent rent growth has begun to close this gap, however, and Pueblo and Grand Junction will soon be up in inflation-adjusted terms.