Is the Apartment Sector Cooling?

October 8, 2012

The apartment sector posted its smallest vacancy decline in nearly two years, according to Reis Inc., a real estate research firm.  

“For nearly two years apartment landlords have been able to boost rents and fill their buildings as Americans, either burned by the housing bust or unable to get a mortgage, turned to renting instead of owning a home,” Reuters News reports. “But rent growth ultimately depends upon significant job growth and rising incomes, and during the third quarter neither have come through.”

The national vacancy rate inched down  from 4.7 percent to 4.6 percent in the third quarter, which is traditionally one of the strongest quarters of the year, Reis reports. The dip was the smallest since the recovery began in early 2010.

"I think the market is getting so tight at this point that further declines in vacancy not supported by strong economic growth are just not going to be possible," said Reis Head of Research & Economics Victor Calanog.

Still, average asking rents continue to rise, inching up 0.8 percent in the third quarter to $1,090 per month, Reis reports. New York posted the lowest vacancy rate in the nation of the 79 markets that Reis tracks, and posted the highest average rent of $2,990 per month.

Reis reports that single-family home buying is becoming more competitive with renting. With low mortgage rates and low home values, home buying beats renting in the majority of metro areas, according to recent industry reports. 

Source: “U.S. Economy May be Nipping at Apartment Sector,” Reuters (Oct. 3, 2012)

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