Thursday, August 16, 2012

Vacancies in rental houses at historic lows, but rent growth remains modest

Vacancies in for-rent condos, single-family homes, and other small properties across metro Denver fell during the second quarter, dropping year over year to 2.0 percent. The vacancy rate rose slightly from the first quarter of this year to the second quarter, but vacancies have remained consistently scarce since the end of 2009.  According to a report released Thursday by the Colorado Division of Housing, the metro-wide vacancy rate during the second quarter of 2012 was down from 2011’s second-quarter rate of 2.6 percent while it was up from 2012’s first-quarter rate of 1.6 percent.

At the county level, the lowest vacancy rates were found in Denver County and in Douglas County where the vacancy rates were 1.4 percent and 1.8 percent, respectively.  

Vacancy rates for all counties surveyed were: Adams, 2.2 percent; Arapahoe, 1.9 percent; Boulder/Broomfield, 2.6 percent, Denver, 1.4 percent; Douglas, 1.8 percent; and Jefferson, 2.5 percent.

“All county areas are now showing vacancy rates below three percent as renters have expanded their searches to include the less-popular areas,” said Ryan McMaken, a spokesman for the Colorado Division of Housing. “There was more variation in the past, but even those areas that had historically higher vacancies have now filled in.”

In spite of historically low vacancy rates, growth in the average rent for rental houses, townhomes and other small properties have been modest during recent quarters. The average rent in metro Denver for single-family and similar properties fell to $1,060 during 2012’s second quarter, falling 0.3 percent from 2011’s second-quarter average rent of $1,063. The second quarter’s average rent this year was up from the first quarter’s average rent of $1,056.  Average rents are not adjusted for inflation.

The average rent rose, year over year, in all county areas except in Adams County, Arapahoe County and Denver County. In Adams County, the average rent fell 6.9 percent year over year and it fell 6.5 percent year over year in Arapahoe County. The average rent was flat in Denver County at $1,007 over the same period.  Growth in the average rent was strongest in Jefferson County where it grew 3.0 percent from 2011’s second quarter to 2012’s second quarter.

“Although vacancies were very low during the second quarter, we find that there is still a reluctance to increase rents significantly in some areas,” McMaken said.  “High turnover, which can increase if rents are pushed too aggressively, is more costly and time consuming for a small owner of one or two single-family units than it is for a large apartment management firm.”

On a per-square-foot basis, however, the average rent rose to 86 cents during the second quarter of 2012 to tie the highest per-square-foot rent ever recorded by the survey.

Average rents for all counties were:  Adams, $1,053; Arapahoe, $1,007; Boulder/Broomfield, $1,570; Denver, $1,007; Douglas, $1,430; and Jefferson, $1,038.