In the first decline in nearly three years, the cost to rent an apartment in Colorado Springs fell by almost $10 a month during the third quarter, a new report shows.
That drop, however, doesn't necessarily signal tumbling rents or a slowdown in demand for apartments. But it is possible rent increases will cool as more new units are built and competition for renters heats up, said Laura Nelson, executive director of the Apartment Association of Southern Colorado.
"Those that can afford to are going to move into the newest product," she said. "And that's going to create maybe more competition to that next layer that's going to have to do something to attract that renter to fill up their units, which are then going to pull from the next layer."
A flurry of new projects - including some downtown and others on the north and northeast sides of Colorado Springs - will add about 1,000 units to the market over roughly the next six months, Nelson said. Those would be on top of nearly 1,500 apartments added so far this year.
Those units should help stabilize rents, Nelson said. But by how much? That won't be known until the apartments open and renters move in, she said.
"I doubt that rents are going to drop," Nelson said. "They dropped a little bit here, but I don't think you're going to see those huge spikes."
A report from the Apartment Association and the Colorado Division of Housing showed third-quarter rents averaged $1,133.23 a month in the Colorado Springs area, down $8.17 from the second quarter.
It was the first time rents declined from one quarter to the next since the fourth quarter of 2014, according to the Housing Division and Apartment Association report. The third-quarter rent figure also broke a streak of nine consecutive quarters of record high rents.
Rent increases have been driven in large part by a stepped up demand for multifamily living on the part of millennials who don't want to be tied to a house, apartment industry experts have said. Also, empty nesters who want maintenance-free living and families who are downsizing also are opting for apartments.
A stronger economy, more people working and a tight supply of homes for sale on the resale side of the housing market also have contributed to the demand for apartments and higher rents.
Other highlights of the third-quarter apartment report include:
- Within different sections of the metro area, the highest average rents of nearly $1,228 a month were found on Colorado Springs' far northeast side. The city's southeast side had the lowest average rents of $971.59 a month.
- Newer, amenity-filled apartments constructed since 2010 fetched the highest rents - averaging almost $1,404 a month. Apartments built in the 1960s had the lowest average rents of nearly $862.
- When it comes to the size of units, renters paid top dollar of almost $1,690 a month for three-bedroom apartments on the Springs' northwest side. The lowest cost paid for an apartment was a southeast side efficiency, which averaged just under $758 a month.
- Only 5.4 percent of apartments were vacant in the third quarter; by comparison the local vacancy rate routinely topped 10 percent 10 to 12 years ago.
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