Foreclosures in Denver Made Impact on Rental Vacancy Rate

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Foreclosures in Denver made an impact on the vacancy rate for residential rental properties in the area in the final quarter of 2009, based on a report from the Colorado Division of Housing.

As foreclosed properties get converted into rentals, the rental property inventory increases, pushing up the rental vacancy rate. On the other hand, as families who lost their homes to foreclosure find rental properties, the rental inventory decreases, pushing down the vacancy rate.

Additionally, as more renters take advantage of the low prices of foreclosed homes for sale and other home buying incentives, the rental vacancy rate increases.

In the fourth quarter last year, the rental vacancy rate rose to 5.5 percent, the highest in three years in the city. According to housing analysts, the major factors for the increase were unemployment, the federal home buying tax credits and the addition of properties into the rental inventory.

According to Gordon von Stroh, professor at the business department of the University of Denver who wrote the Housing Division report, the chief reason for the rental vacancy rate increase in the October-December quarter was the increase in properties that were converted into rentals. A record number of condos, duplexes and townhomes that were originally listed for sale were converted into rentals when they did not get sold after staying on the market for a long time. Among these conversions were foreclosures in Denver, which also ironically increased the demand for rental properties last year.

Most families who were forced out of their homes had to move to rental properties. According to Bob Allredge, a top executive at Lakewood-based rental housing management firm Jericho Properties, some large rental properties even allow two or three families to live together as they make do with their diminishing finances.

Despite the increase in rental properties, the average rent increased in the October-December quarter to over $1,000 per month, the highest 4th quarter rent average since 2003.

Last year, the pace of Colorado foreclosures increased by a relatively small percentage, but the more than 50,000 homes that were put into foreclosure put Colorado the tenth U.S. state with the highest foreclosure rate. The number represented 2.4 percent of all households in the state.

On the other hand, foreclosures in Denver declined by more than 12 percent, but the number of distressed homes was still high at nearly 29,000 units. The Denver area was also 46th among 203 metro areas in rate of foreclosure activity in 2009.

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