Denver Apartment Rents Drop (Denver Post)

[Matthew Schroeder]

The most recent quarterly data from to the Apartment Association of Metro Denver (AAMD) shows that the Denver rental market is cooling off (see link to article below).

Average apartment rents in metro Denver fell for the second quarter in a row in the fourth quarter of 2016 as the market struggled to absorb a record number of new units.

Average apartment rents fell from $1,371 in the third quarter to $1,347 in the fourth quarter, marking the largest quarterly drop in the 36 years the report has been conducted. Median rents stayed flat at $1,329 per unit.

Apartment vacancy rates shot up from 5.1 percent to 6.2 percent.

Metro Denver Apartment Rents Drop (Denver Post)

[Bill S.]

@John Riggs all real estate is local. This is not surprising for me nor should it be to anyone else watching the market. It's not really contrary to the hype. As I've stated before. If you have a luxury condo in downtown you should expect significant pressure on rents. If you have units renting below $2000 per month then probably not so much. Previously (late 2015 or early 2016) AAMD published a vacancy rate of something like 12% for luxury units in the urban core. I can only imagine this is getting worse. The numbers sited in the article support that premise. Average rents are falling while median remain constant. This shows the "below average" prices are continuing to increase while more units are added to the top end and rents are falling in the top end. What remains to be seen is the impact from trickle down. 

So what happens to the market when some of those older As fall to Bs and Bs to Cs? IMO we are going to see low end rent growth level off this year and high end rents decrease. We should still see price increase in purchase properties for the next few years*. As housing prices continue to increase and rents remain flat that will keep some buyers out of the market. I still see very short supply in the below median priced homes and rentals for the foreseeable future. The bottom line is that there is no supply being added on that end (the cost to build is greater than the media rent or home sale price will support in most cases). 

*Now all of this could change if the construction defect law changes. All of those overpriced rental units become for sale and the supply tips back in line with demand. You would see a cooling of the home price increase and those dated condos selling for $300k might see a significant dip in value.

Keep an eye on the numbers.