Real estate analysts expected the nationwide mortgage crisis to have a direct effect on rental unit vacancy rates across the country. But the indirect relationship between mounting foreclosure rates and plummeting rental vacancy rates didn't quite go according to plan, suggesting that rental real estate is driven as much by local factors as it is by the national economy.
According to a recently released report by the Colorado Division of Housing, the overall composite Colorado state vacancy rate for multi-family housing was 6.1 percent for the first quarter of 2008, down 1.4 percent from the first quarter of 2007. The rates of individual market areas in the report -which included the Denver metro are, Alamosa, Aspen, Buena Vista, Canon City, Colorado Springs, Durango, Eagle County, Fort Collins/Loveland, Glenwood Springs, Grand Junction, Greeley, Gunnison, Lake County, Montrose, Pueblo, Salida, Southeastern Colorado, Steamboat Springs, Sterling, and Summit County - varied dramatically, however.
In Aspen, the vacancy rate was 1.4 percent, up .7 percent from the first quarter of 2007; Glenwood Springs was at 1.4 percent, down from 2.2; Grand Junction was at 1.8 percent, up .3 percent; while Eagle County rose .7 percent to 2.7 percent for the first quarter of 2008. Statewide the highest vacancy rate was in Colorado Springs, and had a 9 percent vacancy rate, which was actually down 2.7 percent from the first quarter of 2007.
"This really illustrates how real estate is driven by local factors," says Kathi Williams, director of the Colorado Division of Housing. "Statewide, though, we do know that for-sale housing is not as attractive as it was a couple of years ago, and that's driving people to rental housing. But economic realities affecting vacancies vary quite a bit between the Western Slope and the Front Range, and from one region of the state to the next."
Williams highlighted the influx of workers for the oil and gas industry keeping vacancy rates low in some areas, the number of military deployments in Colorado Springs keeping vacancy rates high, and new developments like the announced cheese plant in Greeley as a few of the reasons for the disparity in rates throughout the state.
Oddly, the economic principle of supply and demand didn't directly factor into average rental prices in the several market areas. Rents in all areas of the state increased compared to the first quarter of 2007, regardless of whether or not the vacancy rate rose or fell. Aspen unsurprisingly topped the list with an average rental rate of $1,132.53, up from $1,106.42 in 2007; Eagle County was second with $1,058.33, up from $1,151.90; and Glenwood Springs' average rental rate sat at $715. The lowest average rent in the state was found in Pueblo, where rent increased from $497 to $532.
"What we're seeing with rents is a 'cost-push' situation in which the cost of doing business is pushing up rents," Gordon Von Stroh said in the report. Von Stroh is a professor of business at the University of Denver and the report's author. "If it were only a factor of demand, we'd expect rents in places like Colorado Springs to be going down."
The Aspen/Pitkin County Housing Authority only tracks information on employee housing units. When asked what the employee housing unit vacancy rate was in Pitkin County, operations manager Cindy Christensen laughed, saying that "there hasn't been any available housing for months."
"Anytime someone vacates a unit, it's gone within a day or so," she added.
The Colorado Division of Housing report was compiled using information from 32,033 units provided by apartment managers, owners and property managers. The report notes that in seasonal markets, like Aspen, fluctuations limit the extrapolation of data, and should thus be used solely as a comparative tool.
damien@aspendailynews.com
