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 Economy

Applications for mortgages dropped to the lowest level in 4 years and home purchases dropped for the third straight week. The increase in rates has also drastically slowed the refinancing which was helping drive the consumer spending. Estimates are that refinancing is down 40% from this time last year (Denver Post, August 3, 2006)

According to a recent article (Daily Camera, p 16a, August 5, 2006), unemployment nationally rose to a 5 month high (4.8%) in June. One result of this was the Fed deciding to fore go another rate hike at the last meeting even though the core inflation rate is the highest in 11 years (Denver Post, August 3, 2006)

Energy prices continue to dominate the consumer market. Not only at the pump but also in the stock markets. Almost any negative news coming from a oil producing area is causing jumps in the price at the pump and drops in the stock market.

Regional Economy

The following is a summary of the Boulder County economic indicators compiled by Dr. Richard Wobekind (Boulder County Business Report, July 7-20, 2006).

The overall indicators are up although the growth is sluggish at best. According to Dr. Wobekind the indications are that the local economy is directly tied to the national economy. As many analysts project the national economy is to be slower for the rest of the year the local economies should also show the same trends. Although the growth in the GDP has slowed many analysts expect growth in the GDP to still be in the 3% range.

Jobs will drive growth. The local unemployment rate is projected to remain 0.5 to 1% below the state average of 4.9%. Colorado is still projected to be slightly below the national rate of 5%. Obviously, more jobs\employment will result in growth for the state. Boulder county growth is still projected to be slightly slower that the rest of the metro area.

The biggest indicator of business investment in Colorado is the Business Leaders Confidence Index. Although this is down to 54.2 from the 60.1 of the 2nd quarter, a number above 50 is still regarded as positive. The only category that was below the 50 mark was local expectations of the national economy.

Overall the Leading Economic Index for Boulder County is up 1.9% over the first quarter 2005 and up 0.4% from last quarter.

In Broomfield county the employment was up 0.6% from fourth quarter. This is an increase of about 2% from 1QTR 2005. Unemployment for the quarter was up about 6.2% than last quarter but is still down 6.9% from the first quarter 2005 level.

Also in the BCBR was an article (David Clucas, p 34A, July 7-20, 2006) that shows almost 46,000 jobs are directly tied to real estate in Colorado. This is almost 11% of the total jobs. Mr. Clucas shows this is “...a double-edged sword...” such that if the real estate market slows so will a large chuck of the local economy. The article quotes Ken Hotard, the senior VP of the Boulder Area Realtor Association, as stating “Northern Colorado is really poised as an area for growth.”

Homebuilders are holding off buying land while the market for new homes remains soft and a record number of homes are on the resale market (Denver Post, July 12, 2006). Although permits are up, about 1/3 will be for multi-family projects close to the light rail corridors and in-fill area. The commercial and industrial segments are showing strong growth so far this year.

In the July 24, 2006 issue of Business Plus (Daily Camera), there is an extensive writeup on the “resurgent” commercial real estate market. This matches closely the feedback I received from my peers in the segment of the industry. Rates for downtown office space rose from $10-12 per sq. ft. to $15-18 as about 92% of the office spaced is leased. In addition, rents are picking up all along the US 36 corridor.

Source: Daily Camera

The peak season is in the final few weeks. Normally, this season lasts from about mid-June through to the Labor Day weekend. Currently the market is strong but there are still segments where the renters are in control.

Over the West's major rental markets, rents were up compared to the same 2005 quarter. Los Angeles showed the greatest increase. The Denver market was up only 0.5% and continues to be almost flat. Across the area home price increases slowed but the increased mortgage rates more that offset this trend. This is driving more people back to the rental market. The Denver Metro vacancy rate is 7.4% down from the almost 10% at the end of 2004.

Water rates to increase 1/1/07! The city is still not able to give specific numbers but each property will have a "water budget" on which the City will base their billing. Usage above this level will result in significant increases in charges.

The City has compiled a database of the noise violations for rental properties. This database will allow Environmental Enforcement to more closely monitor properties with "histories." Indications are this will apply to noise, nuisance and trash violations. Since noise ordinances can carry fines of up to $1000 and 90 days in jail this could have a drastic effect on "problem" properties

Michelle Allen recently was reassigned from the City's Rental License department. This change will probably result in some glitches in the licensing process. If you receive a license renewal make sure the information in correct--especially regarding the type of dwelling and occupancy. Those of you that are Personalized Management Services clients need not be concerned. This is part of our standard services.

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. Again, if you do not want to receive these messages please call or email us and we will take you off this mailing list.