Wednesday, October 30, 2013

Slideshow: Metro Denver Vacancies and Rents, 3rd Q 2013

As reported last week, the apartment vacancy rate in metro Denver was up slightly during the third quarter, and the average rent increased.

The first graph shows the metro-wide vacancy rate:

We can see that the vacancy rates in recent quarters now rival the very low vacancy rates that were experienced during the late 1990s and very early 2000s before the recession of 2002 struck Colorado after the dot-com bust. The vacancy rate was 4.4 percent during the third quarter of 2013, and it was 4.2 percent during the second quarter. The rate had peaked at 9 percent during the second quarter of 2009, for the 2007-2009 recession. The lowest rate reached over the past 20 years was 3.7 percent in 2000.

The vacancy rates in general were near ten year lows across the metro area. In the second graph, we see that the decline in the vacancy rates since 2009 have not been limited to any one or two county areas, and that the declines have been general.

The average rent for metro Denver can be seen in the third graph. The average rent hit $1,048 during the third quarter, and was up from $1,022 during the second quarter. 

We can see steady increases in general with only a couple of periods of declining rents: from  2001 to 2002, and from 2008 to 2009.  The periods of the greatest growth in recent periods have been the late 1990s and the period since 2011.

The fourth graph shows the growth rates in average rent more clearly.  We can see that year-over-year growth rates since the first quarter of 2012 have been coming in at more than 4 percent each quarter. Historically, this is a strong growth rate, but we can also see that it's still well below what was reported during the dot-com boom, when growth rates were often above six percent. Nevertheless, the growth over the past seven quarters has been substantial.

All of the rent levels we've discussed so far in this article have been nominal rates and not adjusted for inflation. In the final graph, I adjust the average rent for inflation, using a base year of 1995. In this case, we can see that real rents are really only now back to what they were during the dot-com boom. Real rents declined from the dot-com bust until 2009 or so when they began to consistently grow again in real terms. 

In real terms, the average rent peaked at $698 during the third quarter of 2001, and for all practical purposes, the real rent is back to its 2001 levels, having reached $682 during the third quarter of this year. (These are 1995 dollars.)