Metro Denver Apartment Rents Down in Q3
DENVER — According to a report published this week by the Apartment Association of Metro Denver, average rents in Denver fell by $19 per month in the third quarter of 2018, continuing a three-year trend in rent decreases during the third quarter. Vacancy rates in metro Denver also fell slightly.
“Average rents fell 1.3 percent to $1,465 during the third quarter, down from $1,484 during the second quarter,” said Mark Williams, executive vice president of the Apartment Association of Metro Denver (AAMD).
During the same period, inflation, referring to the general increase in the price of all goods and services, hit 0.5 percent in Denver, according to the Bureau of Labor Statistics’ Consumer Price Index for the West Region. Adjusting for inflation, rents fell by 1.8 percent over the last quarter.
“The Denver community has debated how best to provide attainable housing, and the good news is that the market is sorting this out,” said Williams. “One of the best pieces of news coming out of this quarterly study is that there are still plenty of apartments renting for less than $1,000 per month. In fact, the study shows that there are an estimated 29,051 apartments in the Denver metro area that rent for $1,000 or less.”
According to the report, in the past year, average rents increased by 3.8 percent, which Williams notes is just 0.4 percent above inflation over that same period. Average rents reached $1,412 during third quarter of 2017 and the Consumer Price Index for the West Region increased by 3.4 percent over the last 12 months.
Historically, rents tend to rise during the third quarter due to dwindling supply in summer months as well as increased household formation is at its highest. During May through September, 18-year olds graduate from high school and 22-year olds graduate from college and many marry during summer months.
2018 marks the third consecutive year of third-quarter declines, likely due to seasonal effects and a pronounced slowdown in construction.
The highest average rents recorded were in downtown Denver at at $1,958 and Boulder averaging at $1,785. The lowest average rents in the metro area were found in Wheat Ridge, Aurora, and South East Denver.
“For average rents to decrease in the third quarter is unusual. For them to drop in the third quarter for three consecutive years is exceptional,” said Teo Nicolais, a Harvard Extension School instructor who specializes in real estate. “Developers today face labor shortages, higher construction costs, and tighter lending standards, which are putting the brakes on new apartment supply. The only other time Denver recorded three consecutive years of third-quarter rent declines, Ronald Reagan was President and average rents in the city were $396.”
While rents have increased throughout the city in recent years, affordable housing can still be found. The report found 10,580 apartments in the Denver metro area that rented for $1,000 or less. Based on the survey’s sampling of 125,654 apartments there are more than 29,000 apartments in Denver that charge rents of $1,000 or less.
Following a more typical trend, the average vacancy rate for the Denver metro area decreased slightly to 5.5 percent in the third quarter of 2018, down from 6 percent three months earlier. According to the report, the average vacancy rate decreased during the third quarter in 29 out of the last 37 years.
Nicolais noted the 2,570 new apartments built during the third quarter of 2018 represents a 40 percent A43 drop from the same quarter last year, during which 4,315 new apartments were built.
Quarter-over-quarter construction levels also fell 25 percent from second quarter of 2018 during which 3,435 units were built. Despite that fact, more than 41,600 new apartments added in the last four years have eased what has been a tight rental market.
“Average vacancy rates, which hit 3.9 percent in the third quarter of 2014 have increased for every third quarter since then,” said Williams.
Commerce City/Brighton, Aurora-Central South East, and Longmont tied for the lowest average vacancy rate of 2.8 percent.