Rent decline in Denver? Seasonal or will it continue into spring
I have been researching rent prices in Denver(Primarily west of 25) and it seems like listing are staying on Craigslist, Zillow, and Facebook marketplace for quite some time. I'm not sure if this is just seasonal or if this is going to become the new norm along with increase in vacancy rates while it takes more time to fill rentals. I am currently under contract on a single family 4/3 in Lakewood that I plan to house hack that also needs updating. I have been lowering my expected rents based on the competition I am seeing. I am also asking myself about the chance of rent and value depreciation on this house over the next 2 years and if it is still a smart purchase while I have time to walk away from it. I still have positive long term outlook on the Denver real estate market.
Some background: I moved here from Oakland in May 2019 and found a room for rent in Wheat Ridge for $900/month +utilities in a 3bed/3bath SFR with key amenities I was looking for that include private bath, garage for my motorcycles and storage bins and easy street parking for my truck. Without going crazy, it seemed like the best option at the time. Now as we enter January 2020, I am unsure if the room I rent could command $900/month. I will need to sublet my room if/when I move out to finish my 1 year lease.
I have always been curious if Denver rents and home values will be negatively affected by all of the new build, higher density, apartment buildings, condos/townhomes/modern 4plex/duplexes that are taking over Denver and more specifically the areas I in interested in living that include Highlands to east Wheat Ridge, Sloan Lake, Villa Park, anywhere along the light rail, West Colfax areas, etc.
I am now seeing room for rent at $1200/month or less for a private room and private bath in some of these new builds on craigslist. My guess is people are trying to subsidize some of their mortgage and still pay $1500-$2000/month themselves but not aggressively house hack mortgage free. I also reading articles about the new apartment buildings offering better concessions to get people to move in sooner.
One article says that projections starting in January 2019 for the next 30 months Denver should have 30,000 new apartments available. I am still seeing a ton of new construction in various phases of completion as we end 2019.
I have read a number of articles online and pulled a couple quotes and links below. Let me know your thoughts and if you have any strategies for your rentals.
Are you planning for rent depreciation when you run your numbers?
Looking forward to hearing everyones input!
https://www.denverpost.com/2019/12/04/denver-rent-growth-slowing/
"In its most recent Denver Rent Report, Apartment List tracked a 0.1% decline in median rents for Denver proper from October to November. The median rate for a one-bedroom last month was $1,069 and a median two-bedroom was renting for $1,353 per month. It’s the third straight month of declines after the peak summer rental season."
"Denver rents have risen 0.7% since November 2018. In Colorado as a whole, rents have risen 1.6% on average over that same period and nationally average rent has risen 1.4%, according to Apartment List. Denver’s rent increases are trailing the rate of inflation in the metro area, which the U.S. Bureau of Labor Statistics tracked at 2.7% year-over-year in October."
- - Denver is 2nd Largest in Apartment building construction, per capita in the U.S.
- - In 2017, 13,348 apartments came onto the market
- - In 2018, the first three quarters delivered 8,448 units in the Denver metro area. There is a delay due to construction backups.
- - In 2019, projections call for 30,000 apartments over the next 30 months.
- - 33% of apartments communities are high-end buildings.
- - 1 out of 7 downtown units come with the concession of one-month free rent
- - Average apartment and privately owned rental rates have decreased the 3rd Quarter
https://www.financialsamurai.com/time-to-start-worrying-about-the-housing-market-again/
I think this whole article is interesting but here's a quote anyways
"Things To Know Before Buying Property Now
1) Rents have softened from peak levels in many of the most expensive cities. Given property prices are a function of rental income multiples, a real estate buyer should be looking to buy at similar pricing discounts from peak rental periods. For example, research whatever comparable New York property you want to buy today that was sold for in March 2016 and aim to buy at a 14.8% discount to the March 2016 price because that’s how much rent prices are down.
In 2017 I experienced softening rents first hand when I tried to find replacement tenants for my SF rental house at a similar rent of $9,000 a month. After 45 days of aggressive marketing, I only got two offers, both for $7,500 (-16.7%). I even hired a rental listing agent for two weeks to find people for at least $8,000 and he failed. As a result, I sold. Pricing pressure starts at the most expensive markets and works its way down. The large supply of condos in many expensive cities has really put a damper on rents and housing prices."