Denver Rental Market

[Bill S.]

See the Denver Post article here.

Update on rental market in Denver. Not really news unless you live in a hole but they are adding 10-20K units in the next two years according to the end of the article.

Summary

Average rent over $1,000 per month in the Metro area.

New units are all high end as they can't afford to construct units for middle or low end.

Demand is driven by migration of young people into the area.

Good time for landlords but the future holds a mixed bag with a ton of inventory coming on line.

[Bill S.]

Oversupply in any segment pulls down the rents in every segment. Too many A units means the B tenants can now afford to live in A style so with few B tenants then C tenants .. and so on. I don't believe any segment, SFH included, are immune from oversupply. For example if apartments are cheap enough some tenants will choose to stay for economic reasons.

With oversupply A rents will come down and someone will take a hair cut and some will be purchasing distressed properties.

The only thing that will prevent this is if the population continues to grow in that segment through migration but in the end I think they will over build. When we hit that point is the question. It could be this year or in 2 or 3 years, with the current trend the number of units being added is incredible (2-4X) compared to historic. It's like single family homes in Phoenix and California in 2005 where twice as many were being built as would be reasonably absorbed.

What is it they say in stock investing? The trend is your friend until it ends.