Denver-Boulder, Colorado The second quarter of 2002 brought the first signs of recovery to the Denver and Boulder area economies. The average number of nonagricultural jobs during the second quarter of 2002 was 32,000 less than the average for the second quarter of 2001, a decline of 2.3 percent. Ordinarily, this would not be considered good news, but it represents some improvement from the first quarter, when the total was down more than 40,000 jobs from the first quarter of last year. The weakening during the past three quarters pulled the 12-month average for the two areas down 1.9 percent from the 2001 average. Unemployment rates, which had jumped from approximately 3 percent in the middle of last year to almost 6 percent in early 2002, eased back to 5.5 percent in both areas by June. Layoff announcements continue but are becoming less frequent. Qwest is still the largest private-sector employer in the area, but it will soon yield its first-place status if layoffs at the company continue. The unraveling of the local telecommunications and high-technology industries led to large employment losses in the business services and communications sectors. These losses swamped small gains in local government and health care. Recent telecommunications and high-technology layoffs have dramatically altered the companies’ appetites for office space and left the local office market with a substantial surplus. After suffering a negative absorption of 2.5 million square feet in 2001, the office market now faces a vacancy rate of more than 20 percent. The second-quarter slowing in the rate of job loss is moderately encouraging, but Denver and Boulder will finish the year with declines in total jobs unless the pace picks up dramatically in the second half of 2002. The past decade’s strong economy supported absorption of approximately 5,000 rental units per year during the late 1990s. Apartment construction matched this pace for most of the period from 1994 to 1999, but in 2000, activity increased to more than 9,000 units and remained at that level in 2001. This surge in construction occurred just as the national economy was entering a recession and the local telecommunications and high-technology industries began to falter. As units started in 2000 and 2001 began to enter the market, the renter vacancy rate, as reported in a vacancy study done for the Apartment Association of Metro Denver, climbed from the 4- to 5-percent range typical of the late 1990s to almost 9 percent by the fourth quarter of 2001. In the first and second quarters of 2002, the vacancy rate hovered at 9 percent, but renter vacancies are unlikely to have peaked with nearly 9,000 apartments still under construction. The second half of 2002 will see continued softening and double-digit vacancy rates. Apartment construction slowed significantly in the first half of 2002, which will help return the market to a balanced state. Nevertheless, stability is well beyond the reach of the market for this year. Rent increases have all but disappeared. According to a second-quarter 2002 survey done for the Apartment Association of Metro Denver, the average rent was down 1 percent from 1 year ago. The analysis of rents by age of unit reveals that the average rent for units built after 1995 declined during 2001. Concessions are abundant; most provide 1 to 3 months of free rent, but some projects offer free utilities, groceries, DVDs, and drawings for a new car or a year’s free rent. The sales market, particularly for new homes, has not been immune to the current economic slowdown. The Genesis Group, a local consulting firm, reports that the number of new homes sold in the Denver and Boulder areas during the first quarter of 2002 was 14 percent below the number sold in the first quarter of last year. This modest drop is an improvement from the virtual collapse last fall but indicates a pause from the brisk pace of sales typical in the late 1990s. Builders are offering free upgrades and other incentives on speculatively built homes, but this inventory is still up slightly from last year at this time. Prices continue to increase, at least in the detached market. The average sales price for new, detached homes in the first quarter was $270,571, up 6 percent from 1 year ago. The average for new, attached homes, $185,589, was down slightly due to fewer sales of high-priced lofts downtown. The Denver Board of REALTORS® reports that existing home sales during the first half of 2002 are 2 percent ahead of the pace for the first half of last year. The inventory of listings is virtually equal to that of 1 year ago. The average sales prices for both detached ($265,751) and attached ($167,025) resales are up slightly more than 4 percent from the first half of 2001. Price increases continue but have definitely slowed from the double-digit gains of the late 1990s. Meanwhile, Boulder home prices remain high. The Boulder Area REALTOR® Association reports that the average sales price during the 12-month period ending May 2002 was a relatively affordable $252,000 in Longmont. In contrast, however, the average price in the city of Boulder is slightly less than $418,000, and the average price of homes in the Eastern Plains area is more than $455,000.

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