Friday, December 7, 2012

Single-family rental vacancies fall to 2.3 percent

The third-quarter vacancy and rent survey for single-family, townhouse and condo rentals is now available online. All data in the report is for Metro Denver only.

The vacancy rate in all small rental properties surveyed was 2.3 percent during the third quarter, and was down from the 3.4 vacancy rate recorded during the third quarter of last year.

The average rent for all properties surveyed rose 3.9 percent, rising from 1,049 during the third quarter of 2011 to 1,090 during the third quarter of this year. This was the largest year-over-year increase in the average rent since the third quarter of 2009, when the rent growth rate was 6.1 percent.

The first graph shows the metro-wide vacancy rate for single-family homes, condos and townhomes. The vacancy rate during the third quarter of this year was 2.3 percent, which is very low.

In recent years, the vacancy rate in single-family homes tends to be lower than in multifamily units. The vacancy rate in multifamily apartments since 2009 has tended to come in between 5 percent and 9 percent while it has ranged from 2 percent to 6 percent in single-family units, et al. The decline in single-family vacancies can be attributed at least partially to the rise of foreclosures and the decline of home sales. This phenomenon has driven many households into renting homes instead of owning.

The second graph shows that this trend in declining vacancies extends to condos and townhomes. Condo vacancies have tended to be higher and more volatile than that in houses and townhomes, but all three property types have nevertheless seen declines over the past ten years. 

 The third graph shows the nominal (not inflation-adjusted rent) as measured by the report. Rents have been largely flat at around $1,050 for the past several quarters, but growth accelerated during the third quarter of this year. Growth was significant between 2005 and 2011. 

The fourth graph shows the average rent by property type. We can see that condos, by far, have the lowest average rent and that the average rent is actually down slightly from where it was in 2010. If we were to exclude condos from our overall analysis, we would see even more rent growth in rents in these small rental properties.

If we adjust for inflation, we see that the average rent hasn't really gone up much since 2006. The increases in nominal rents in recent years has been just enough to keep rents flat in real terms, but the third quarter's increase has pushed up real rents to the highest level reported since the fourth quarter of 2011. Over the past ten years, the inflation-adjusted average rent for these properties in metro Denver has gone down from $919 (2nd Q 2003) to $820 (3rd Q this year.)