Rents are Soaring Too

The front page cover story of The Denver Post on September 7th was titled, “Rising Front Range Rents are Widespread and Will Keep Climbing.” Aldo Svaldi utilized several different sources for his story that I will share with you.
· According to Apartment List rent in CO Springs is up 22% since the start of the pandemic.
· Castle Rock has seen apartment rents soar by 21.6% since the pandemic started, followed by Parker with an increase of 20.5, Thornton at 19.9%, Lone Tree at 19.1%, Littleton at 17.7% and Broomfield at 16.6%.
· In the city of Denver median apartment rents are up 12.2% over the last 12 months and rents are up 8.3% since the pandemic started.
· From 2017 and early 2020 Denver apartment rents had only increased by 6.4% due to a surge in supply. Amazing what extra supply does to prices. Maybe we need to increase supply of new homes for sale?
· Single family rents are rising much more slowly increasing just about 5% annually according to Atlas RE using data from John Burns RE Consulting.
· Tony Julianelle, CEO of Atlas RE, whose firm manages thousands of properties in CO for private investors said rents are not rising as fast as some investors are choosing to avoid turnover when they have good tenants. I agree with that.
· Second, Julianelle, said “When we look at the people who are applying to rent properties, a very high number of them are coming from L.A., NYC, and San Francisco.
· Zillow estimates that metro Denver rents on all properties are up 10.2% year over year to $1872.

What’s causing rents to soar? These factors were cited in this story—
· RENTCafe, using data from Yardi Matrix is estimating that developers will only add about 5600 new apartments this year down roughly 50% from the last 3 years. This is due to labor and construction material shortages.
· The moratorium on evictions was also cited as a reason for less supply as those people didn’t seek a new rental unit.
· Next, demand is increasing. Why? First reason cited is the Fed’s policy of keeping rates at record lows which has caused home prices to soar and thus has priced some renters out of buying a home.
· Second, the “key reason seems to be that more households are forming as young adults move out of their parents’ homes as we now have more households than we did before the pandemic.

So, if your rent has increased by 20% from $1,800 to $2,160, this $360 a month is equal to a $85k price increase on a home purchase. At least with homeownership you are LOCKING IN YOUR HOUSING COST; whereas by renting your housing costs will continue to increase. Second, you can start building YOUR WEALTH through homeownership. Third, renters are always paying a mortgage; their landlord’s mortgage.