May 5, 2011

Rising Rents, Falling Vacancies Coming

From John Rebchook w/ Inside Real Estate News:

Despite hitting a 10-year first-quarter low of 5.5 percent, Denver-area renters should brace for even lower vacancy rates – and higher rents – later this year.

“There will be some sticker shock,” said Gordon Von Stroh, the University of Denver business professor who authored the apartment vacancy rate report for the Apartment Association of Metro Denver and the Colorado Division of Housing.

Von Stroh said that the “key thing” about today’s report, which earlier was reported by InsideRealEstateNews, is that the vacancy rate typically rises in the first quarter from the fourth quarter, for seasonal reasons.

“It remained the same, at 5.5 percent,” Von Stroh said. “That indicates a further strengthening of the apartment market. If we see any improvement in the local economy – or even if the economy remains where it is – we are certainly going to see a drop in vacancy rates and increased rents.”

Read the entire article here.

While one sector of the real estate market is languishing (residential), another seems to be doing quite well.  This brings me back to some comments I made a while ago regarding the "tipping point".  I don't have the answer to this, but there will come a time here in the near future where rents are going to be high enough that people will look towards buying homes solely on the fact that they will be able to control their monthly outflow for their housing expense.  Sure, you can lock in a year lease at one rate, but what will it be next year?  As the rental market remains strong, one can safely assume the rents will probably increase each year.  So, back to my original question, what will be the tipping point on rents that actually make renters decide on locking in their housing cost by buying homes.  When that time comes, I would imagine that there will be a pretty solid bump in the residential markets.

Share This Post
Please enable Javascript to comment on this blog