Vacancies in rental houses, condos at 6-year low in metro

John Rebchook, Rocky Mountain News

Wednesday, September 19, 2007

The overall vacancy rate for-rent single-family homes, condos and other non-apartment unit properties in metro Denver dropped to a six-year low of 4 percent during the second quarter, a state report released today shows.

The vacancy rate fell from 7.1 percent in the second quarter of 2006 and from 4.2 percent in the first quarter.

The second quarter's vacancy and rent study of small rental properties was authored by University of Denver business professor Gordon Von Stroh for the Colorado Division of Housing.

The report shows that vacancies in properties such as for-rent townhomes, duplexes, and single-family homes are at their lowest levels since the survey was launched in 2001.

All counties reported lower vacancies during the second quarter of 2007 as compared to the second quarter of last year.

Adams County reported the largest drop with vacancies decreasing to 5.5 percent from 11.0 percent a year earlier. Denver County reported the lowest vacancy rate in the metro area, dropping to 3.0 percent from 6.6 percent a year earlier.

Other county vacancies: Arapahoe, 4.5 percent; Boulder/Broomfield, 4.9 percent; Douglas, 3.9 percent; and Jefferson, 4.0 percent.

Of all dwelling types surveyed, single-family homes showed the highest vacancy rate with an overall rate of 4.8 percent, declining from 7.6 percent a year earlier. Vacancies in for-rent condominiums dropped to 3.5 percent from 7.5 percent reported a year earlier. Vacancies in townhouses, duplexes, triplexes, and fourplexes all have declined since the second quarter of last year. Triplexes reported the lowest vacancy rate of all dwelling types at 2.4 percent.

In general, a vacancy rate of 5 percent is considered the "equilibrium" rate, and vacancy rates below 3 percent indicate a tight market, according to Von Stroh.

"The trend is definitely toward fewer vacancies," Von Stroh said. "This also follows the trend of rental housing in general throughout the Denver area. Vacancies in multifamily apartment complexes are declining as well, so it looks like rental housing is an increasingly attractive option for people out there."

Foreclosures continue to be a factor in the market for single-family rentals.

"There are a lot of homes on the market and a lot of foreclosed homes, and many of them are being rented out," said Kathi Williams, director of the Colorado Division of Housing. "But overall, it looks like the impact of that is limited since the properties we've surveyed continue to see declines in vacancy."

Susan Melton of Assured Properties, and president of the Denver Chapter of the National Association of Residential Property Managers agrees that the market continues to improve.

"The 2007 rental market is definitely a better market; and the vacancy rate for our office is averaging about half of what it was for 2004, 2005 and 2006. I had some concerns about our ability to absorb all the townhomes and condos that have come into the rental market because of the poor sales market, but we have easily been able to rent out the new units. As long as a rental property is priced right and shows well, we are able to quickly get it rented."

Rental rates per square foot among all units were highest in Denver at 82 cents per square foot, and lowest in Adams County at 71 cents per square foot.

Average rents increased to $946.07 for the second quarter of 2007, up from $937.18 in the first quarter and up from $931.53 in the second quarter of 2006. Rents were highest in Douglas County at $1,325.86 and lowest in Denver County at $879.23. Average rents increased the most in Douglas County, increasing from $1,206.87 to $1,325.86. Average rents decreased in Adams and Denver counties.

Average monthly rents for all counties were: Adams, $1,015.59; Arapahoe, $956.55; Boulder/Broomfield, $1,202.80; Denver, $879.23; Douglas, $1,325.86; and Jefferson, $922.54.

Susan Kirkpatrick, executive director of the Colorado Department of Local Affairs, noted that the rental market for single-family homes and for-rent condos is not insignificant.

"This survey shows pretty clearly that the rental market continues to improve in the Denver Metro area," Kirkpatrick said. "There are a lot of single-family homes being rented out by private citizens who own only one or a few properties, and we want to make sure we have a good grasp that sector of the economy."

The Colorado Statewide Vacancy and Rent Study is released each quarter by the Colorado Division of Housing. The report is available online at the Division of Housing web site: http://dola.colorado.gov/cdh