Rising Mortgages Keep Denver Metro Apartment Vacancy Rates Low | Company
Rapidly rising mortgage rates could lower record home prices that Denver sellers took advantage of last spring, but they only serve to bolster the low-vacancy apartment market, developers and data say. rental news.
“You’ve seen some (home) prices start to come down as new homes and resales take longer to sell, but that’s actually helping the apartment market,” said developer Darell Schmidt of Allante Properties.
The company has built $200 million worth of new apartment projects over the past six years, much of it in the Highlands and downtown, according to Schmidt.
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This impression is consistent with the latest Denver Metro Area Vacancies and Rents Survey, released by the Apartment Association of Metro Denver.
August figures show the vacancy rate for multi-family homes at 4.7%, up slightly from the spring quarter and one point higher than summer 2021 vacancy rates.
The Association expects to release the third quarter survey later this month.
“It’s sourcing, sourcing, sourcing,” said Brad Arnold, broker at Slifer, Smith & Frampton, which sells The Arbory City Park West in Denver’s Uptown neighborhood.
Arnold, whose buying units compete for some of the same customers sought by rental projects, notes that in the central urban area bounded by Sheridan Boulevard east to I-225 and I- 70 south to Hampden Avenue, there are only 150 condos on the market now between $400,000 and $1 million.
And if a buyer wants a newer home, the search becomes much narrower, Arnold said. Only 29 of those that had been built in the last ten years are now on the market, including nine condos that remain.
“I think with rates going up as quickly as they have, a lot of people are being forced to keep renting,” Arnold said.
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The relatively low number of vacancies suggests that developers as well as lawmakers need to stay focused on getting apartments to market, according to Drew Hamrick, senior vice president of government affairs for the Colorado Apartment Association.
“We must encourage new development through sensible, building-friendly policies such as tax credits, development grants and license fee reductions,” Hamrick said in a statement accompanying the inquiry. .
“If we don’t increase our pace of construction, prices will continue to rise,” Hamrick said.
Rents continue to rise, despite the slight increase in vacancy. The survey shows monthly rates rose 5.3% in the last quarter, now averaging $1,860 in the metro area. The year-over-year increase is 12.6%.
In addition to the increased demand for housing, continued inflation in materials and other construction costs is driving up rental prices.
Ron Throupe, who authored the Association’s Rent and Vacancies Survey at the University of Denver’s Daniels College of Business, said production costs are rising faster than the index for consumer price itself, which reduces profit margins and passes costs on to consumers.
According to the survey, Metro Denver currently offers some 388,000 apartments, and an additional 4,000 new units were added during the second quarter. The Colorado Apartment Association expects another 6,000 units to be delivered by the end of the year. A secondary report cited by the Apartment Association of Metro Denver as part of the same statement noted that an additional 40,000 units are being developed in the area over the next two years, but labor issues and supply should significantly reduce the actual numbers. .
Apartment Association leaders point out that the same problems are currently being experienced in markets across the country.
Some real estate agents are suggesting that lower buying house prices could favorably affect the outlook for renters, but Arnold said he views that as unlikely.
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“Everyone says prices are going down, but I don’t see it,” Arnold said. “There aren’t a lot of options (to buy) under a million dollars.
“Everyone has to live somewhere,” Schmidt said, noting that some tenants will make up for the tight market by taking on a roommate, while others will settle for less attractive locations.
Meanwhile, the apartment market represents a good place for investors, Schmidt said: “It’s a great opportunity to beat inflation because you can always raise rents.”