Rental houses in short supply

Foreclosures cited for a vacancy rate lowest in decade

John Rebchook, Rocky Mountain News

Published September 20, 2007 at midnight

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Vacancy rates for rental homes are the lowest in recent memory, thanks to record foreclosures in the Denver area, officials said Wednesday.

Only four out of every 100 non-apartment unit rentals - including single-family homes, town-homes, condos and triplexes - were vacant in the second quarter, according to a report released by the Colorado Division of Housing.

The second-quarter 4 percent vacancy rate is the lowest since Gordon Von Stroh, a University of Denver business professor, began compiling the report six years ago.

In the second quarter of 2006, the vacancy rate stood at 7.1 percent.

It is most likely the lowest vacancy rate since the Denver-area housing market was booming in the mid-1990s, said Robert Alldredge, owner of Jericho Properties, which manages properties.

"I'd say it is the lowest in at least 10 years," Alldredge said. "Back then, as soon as you put a house on the market, you decided which of three offers you would accept. We're not there yet, but we're getting closer."

Von Stroh said people who have families and lose their homes in foreclosure and short sales typically are going to rent another house rather than a traditional apartment.

The flip side is that as investors snap up more foreclosed homes, many of them will be rented before they are sold, adding to the supply of rental homes on the market, Von Stroh noted.

"I wouldn't be surprised if we saw an increase in the vacancy rate in the third quarter because of that," Von Stroh said.

Average monthly rents increased to $946.07 for the second quarter of 2007, up from $931.53 in the second quarter of 2006.

In many cases, however, people are renting houses they can't sell for a profit for less than their mortgage payment, Alldredge said.

"People tell me this is their monthly mortgage payment, so they have to get at least this amount in rent, but I tell them it doesn't work that way," Alldredge said.

It is better, he said, to lose $100 or $200 a month by renting a house, than to carry the entire mortgage payment.

"It's the difference between bleeding to death slowly, and hoping the market will turn around, and bleeding to death quickly," Alldredge said.

Vacancy rate for rentals*

County Percent

Adams 5.5

Arapahoe 4.5

Boulder/Broomfield 4.9

Denver 3.0

Douglas 3.9

Jefferson 4.0

*Includes single-family homes, townhomes, fourplexes, triplexes and duplexes.

Source: Colorado Division of Housing