This newsletter is a compilation of news and information regarding the rental markets in Boulder and Broomfield counties and the economic status of and outlook for the area. It is issued during the first week of the month. The sources for the data include local and regional news media, association publications and seminars, and information gathered from contacts in the property management and real estate fields. We make every effort to cite all of our sources. Should we miss one please let us know so that we can correct the omission.

National Economic News

The month of September started out with a wallop, due to the impact of Hurricane Katrina. The national unemployment rate was at a four year low of 4.9 percent, when the hurricane touched down and devastated the Gulf Coast. Economists estimate a loss of up to 1 million jobs for the short term, and possibly 500,000 for the long term. (The Rocky Mountain News, Sep. 3, 2005).

Despite the improvement in the national economy, wages have remained stagnant and barely keeping up with inflation. (The Rocky Mountain News, Sep. 3, 2005).

Experts predicted that the economic impact of Hurricane Katrina could top $1 Billion, impacting upon fuel prices and other goods, slowing spending, and slowing the movement of trade goods into and out of the U.S. (The Denver Post, Sep. 7, 2005).

Existing home sales in the U.S. surged in August to their second highest level ever, while prices reached their all-time high. (The Denver Post, Sep. 27, 2005).

Following Hurrican Katrina, consumer confidence suffered its largest drop in 15 years. Analysts were concerned about consumer spending for the rest of the year. (The Denver Post, Sep. 28, 2005).

At the end of September, the U.S. stock market experienced its best third quarter in seven years, despite the impacts of Hurricanes Katrina and Rita. The S&P 500 gained 3.2 percent, the Dow gained 2.86 percent and the Nasdaq gained 4.61 percent. (The Denver Post, Oct. 1, 2005).

Regional Economic News

Economist Tucker Hart Adams warned that economic growth in Colorado will slow in 2006, due to rising interest rates and higher energy costs. (The Denver Post, Sep. 14, 2005).

The Colorado unemployment rate dropped from 5.3 percent in July to 5.0 percent in August. The Colorado work force reached a record of 2.233 million workers. The nonfarm work-force total is only 15,000 short of its all-time high reached in December, 2000. (The Rocky Mountain News, Sep. 17, 2005).

As a result of increases in natural gas prices, home energy bills will likely rise as much as 49 percent over the upcoming winter. (The Rocky Mountain News, Sep. 17, 2005).

Colorado bankruptcies were up 13 percent in September over the same period last year. For the month alone, new filings rose 30 percent. (The Rocky Mountain News, Sep. 24, 2005).

The metro Denver housing market declined in September as compared to the same period a year ago. Median home prices dropped 2 percent from August and the number of homes closed dropped from a year ago. (The Denver Post, Sep. 28, 2005).

The unemployment rate in metro Denver fell to 4.9 percent in August, its lowest rate since 2001. (The Denver Post, Sep. 29, 2005).

Housing price increases slowed in the Boulder-Longmont area, ending a six quarter run of price increases. (The Boulder County Business Report, Sep. 16-29, 2005).

Well, the peak season is behind us. Once again, it was a very interesting year. While we saw an initial uptick in the number of prospective tenants and increase in some rents early, the end of the season was mixed.

The early season saw some rents increasing early. However, after about mid-July we saw the vacancies staying high and rents beginning to come back to 2004 levels--some market segments even saw some further decreases in rents.

In looking at the chart above we saw lower vacancy rates down from the last two years. We also saw a large spike in vacancies in late August and early September. We attribute this to a large number of student properties that normally do not directly affect the rest of the residential market. As of today the vacancy rate is back to a level similar to October 2004. This is still an improvement from the levels in 2003.

There are a number of factors that will continue to affect the rental market in the area. As with any sector, there are both positive and negative factors. These include:

Positive factors:

• Interest rates are still climbing. As this continues we will see more buyers become renters.
• Home prices steady or increasing will move some back to the rental market.
• Jobs increasing in the area brings new prospective tenants to the area. This will have a larger impact in some areas that in others, obviously.

Negative factors:

• Fuel prices continue to be a factor. Many of us are looking at reducing our commutes. This will affect some areas negatively and some positively.
• Slow growth in the area will continue to keep the prospective tenant pool lower than normal. Fewer people competing for more properties.

Unknown:

The changes in the bankruptcy laws, and the resulting huge increase in filings, may affect the rental market. It will probably be some time before we fully understand how significant this will be. We are hoping this will end up reducing the number of rental properties overall and thus improve the market over time. We will have to just wait this one out.

Interest rate change coming in January! Remember the interest owed on security deposits changes each year. You must pay the interest based upon the rate in effect when you received the deposit. The past rates are:

• prior to 4/1/2004 it was 5.5% simple interest
• 4/1 - 12/31/2004 it was 1.08% simple interest
• all of 2005 it was 1.85% simple interest

Boulder should publish the rate for 2006 very soon.

What is a competitive rent for your property? There is no one answer for everyone. We will be working with each of our clients to determine how their property should be priced in this market. Please contact us if you have specific questions or want more information.

We are actively working to grow the business and to add new properties to our management inventory. If you know someone that would be interested in our services please send them our way. We pay referral fees to anyone referring us business!

That wraps things up for this month.

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