family homes were up by 1 percent from a year ago. During this same period, the average home sales price increased by 6 percent to $312,000. An increase in sales of homes priced at more than$500,000 contributed to the average home sales price increase. During the past year, sales of existing attached homes were up by more than 1 percent and the average sales price of these homes increased by 3 percent to $189,100. The inventory of unsold homes increased by 20 percent in the past 12 months to 30,450 units as of May 2006. The increase in inventory is partially due to the prevalence of interest-only and adjustable rate mortgages. Many local homeowners have had their monthly payments increased significantly due to rising interest rates, forcing some to put their homes on the market or face foreclosure. During the 5 months ending May 2006, the percentage of home foreclosures in the 59
Denver metropolitan area increased by 31 percent compared with the same period a year ago. According to local real estate officials, the number of foreclosures is expected to peak in 2006 and begin to decline in 2007 as a result of expected stronger employment growth and reduced levels of new construction. During the 12 months ending May 2006, multifamily construction in the Denver-Boulder area, asmeasured by the number of building permits issued, declined by 8 percent to 4,600 units. This figure is well below the pace of the 2000-through-2002 period, when an average of approximately 10,000 multifamily units were built each year. According to the Home Builders Association of Metropolitan Denver, apartments accounted for 20 percent of the multifamily units permitted during the 12-month period ending May 2006. In contrast, apartments accounted for 75 percent of total multifamily units permitted in 2000. The reduction in apartment construction is due to overbuilding in the early part of the decade and the time required for the market to absorb the surplus rental units.The rental market in the Denver-Boulder metropolitan area is improving but remains somewhat soft. According to a survey published by the Apartment Association of Metro Denver (AAMD), during the first quarter of 2006 the rental vacancy rate was 7.4 percent, the lowest rate in 5 years,and was down from the 9.3-percent rate recorded during the first quarter of 2005. Over the past year, average monthly rents have increased slightly to $834 while the average value of concessions has increased slightly to 16 percent. Strong job growth and a limited supply of new apartments have contributed to the market’s gradual recovery. According to AAMD, 8,100 units were absorbed in 2005, the highest rate of absorption in 20 years. Colorado Apartment Insights, LLC, forecasts 2,700 scheduled apartment unit completions in 2006, well below the expected absorption rate. Demand is expected to continue to exceed supply in 2007 and 2008 as builders continue to hold back on production until rents become more in line with construction costs. As aresult, renters can expect rent increases and fewer concessions.