Friday, May 17, 2013

Some details on Grand Junction vacancies

Grand Junction's first-quarter vacancy rate of 11.8 percent is being driven by vacancies in 2bd/2ba apartments and 3bd apartments. In the first graph, we see that the first quarter's high vacancy rates in those units continues a trend that has been forming since 2010. On the other hand, vacancies  in 1 bedroom and 2bd/1ba apartments have been rather low.

Higher vacancy rates in the larger units during times of economic distress are common due to economizing on the part of renters. Also, in smaller, less urbanized markets such as Grand Junction, the larger units compete with single-family rental homes. What we find in Grand Junction is that as the labor force shrinks (as it has been doing) and employment growth his limited, renters seek smaller apartments. It is especially easy to cut one's rent by downgrading slightly from a 2bd/2ba to a 2bd/1ba, and we see that vacancies in 2bd/1ba have actually been declining in recent years. 

The big swing in vacancies down during 2011 (and then up again in 2012) was mirrored in other smaller markets as well, such as Greeley, and corresponds to the very low number of home sales that took place during 2011, among other factors. 

Not surprisingly, we see in the next graph, that recent declines in average rents in the area are being driven by declines in average rents in the 2bd/2ba and the 3 bedroom units. Average rents in the smaller units have held up well, but we see some big declines in rents in the larger units. 

One interesting aspect of the Grand Junction market is that the larger apartment buildings appear to be less popular. With the exception of the boom period, larger buildings in Grand Junction are consistently less popular than medium-sized and small buildings in the region. This is not the case in all similarly-sized markets. In Greeley, for example, larger building are more popular than smaller ones, historically speaking. In the next graph we do see that the first quarter's numbers in large buildings simply continue a trend that has been building since 2009. 

So, recent high vacancy rates in the region are certainly not the result of uniformly increasing vacancies across the region. Instead, we find that high vacancy rates are driven by larger units in larger building. Some of this is a result of renters attempting to economize, and some of it is due to the fact that larger units compete with single-family rentals that can provide more space at comparable prices.

Additional notes:

According to the Census Bureau, the maximum number of apartments in Mesa county is about 8,100. This includes condos as well, so the number of apartments is somewhere below 8,000, and is likely around 6,000. The sample size form the vacancy survey then is about 20 percent of total units.

There are about 62,000 total housing units in Mesa County.