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DENVER-In an analysis obtained by GlobeSt.com, Eric Tupler, vice president of L.J. Melody & Co., notes that not only did the overall Denver-area apartment vacancy rate jump to an 11-year-old high in the third quarter to 6.8%, but the highest vacancies are found in the newest product. Units built from 1990 to 1994 increased to 9.5% from 7.6% in the previous quarter and units built form 1995 to the present increased to 10.7% from 7.7%.

”It’s Economics 101,” Tupler tells GlobeSt.com. ”Basic supply and demand.”

He notes that 3,299 units were delivered to the metro area during the third quarter, more new product in any quarter since the late 1980s. Also, year-to-date deliveries totaled 6,635 units compared with 3,061 units for the same time period in 2000. In fact, in the first nine months of the year, developers put more units on the market than in all of 2000, when the tally reached 5,626.

Meanwhile, mortgage rates dropped to the lowest rate in decades, and homebuilders sweetened the pot making them even lower. That led more renters to become homebuyers.

Demand for apartments also dropped because of declining consumer confidence, causing renters to try and reduce their cost of living, he says. Tupler says the high-end 1990s and newer product will continue to under-perform the market until there is either a reduction in the supply or an increase in demand caused by rising interest rates slowing down the new home market. Also, an increase in consumer confidence would help, he adds.

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