Boulder rental market sizzles in midst of mortgage cool-down

While stricter mortgage-lending requirements and stagnant appreciation rates have all but put the brakes on some real estate markets, the rental market is full-speed ahead – especially in Boulder city limits.

“It’s very hot,” says Sheila Horton, executive director of the Boulder Area Rental Housing Association. “It’s been a very solid market. It’s the strongest market we’ve seen in several years.”

How hot is it?

Horton says people are already asking to pre-lease units for next year, when renters don’t usually start leasing until January or February.

“I think the mortgage problems have caused people to reconsider the value of living in an apartment,” she says.

Colorado Apartment Insights LLC reports that the south Boulder market (south of Arapahoe Road) had the lowest vacancy rate – 3.2% - of the seven-county Denver metro market in the third quarter of 2007. The north Boulder market (north of Arapahoe Road) is also doing well, with a 4.1 percent vacancy rate during the same period.

With fewer people moving out of rentals and into their own homes, combined with growing enrollment at the University of Colorado, Boulder also has more demand for rental units, Horton says.

“That has a big impact in our market,” she says, noting the university’s sophomore class had about 500 more students than the class before when they entered as freshmen.

By nature of its high cost of living, Boulder tends to have more residents who rent rather than buy a home, Horton says.

“Current statistics say about 53 percent of everyone who lives in Boulder rents,” she says, quoting U.S. Census Bureau data and an affordable-housing study by CU’s Leeds School of Business. “Of that 53 percent, about 28 percent of them are students. People think about Boulder as student housing, but a high percentage of those who rent in Boulder are not students.”

Boulder has not seen the high foreclosure rate that has affected other communities, Horton says. One reason why is if Boulder homeowners can’t sell their single-family homes, they convert them into rentals.

“There are certainly rental properties on the market,” she says, from single-family houses to large complexes, for those who want to get in on the rental action while it’s hot.

What investors should understand if they buy property in Boulder is that the city has strict occupancy limits, Horton says. The city bases these limits on location and not the number of bedrooms in a property, so potential owners need to know what the limits are prior to making a purchase.