Vacancies Increase in 2009

Friday, January 08, 2010 - By Gate Arty

The apartment vacancy rate ended the year at 8%, the highest level since 1980. This according to Reis Inc., a New York research firm that tracks vacancies and rents in the top 79 U.S. markets. Rents fell 3% last year, according to Reis. Led by major metropolitan cities that experienced brisk growth until the recession.  Effective rents -- which include concessions such as one month of free rent -- fell 5.6% in New York last year, the worst since Reis began tracking the data in 1990.  Very few markets have been spared. During the fourth quarter, vacancies increased in 52 markets, while they improved in 17 and stayed flat in 10.

Apartments have been squeezed because younger workers, who are more likely to rent, have experienced the brunt of job losses during the downturn.  Such oversupplied markets as Florida, Phoenix and Las Vegas are hurting, even though housing sales have picked up. Marcus & Millichap is to release a separate report on Friday that forecasts a further 2% to 3% drop in apartment rents over the next year, most of which will be concentrated over the next six months. One potential silver lining for apartment owners is the fact that many of those developments had secured financing before credit markets seized up, and since the credit crunch has frozen most new development, new apartment completions should fall by half in 2011.  However, government efforts to prop up the housing market also threaten the apartment sector by making it easier for some renters to buy homes. Some landlords have reported a slight uptick in renters moving out to buy homes. Thanks to falling home prices and record low mortgage rates, it now costs less to own than it has in the past decade on a mortgage-payment-to-rent basis. But falling rents are expected to offset some of the recent improvement in affordability, making renting more attractive than owning in some markets

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