George S. May Business Blog

Apartment vacancies up – Rents down

Apartment vacancies in the US are the highest they have been in 22 years, climbing from 6.1 percent a year ago, to 7.5 percent. New York-based real estate research firm Reis Inc. said that the last time landlords had so much empty space was in 1987, when vacancies reached 7.6 percent as the Standard & Poor’s 500 Index plummeted 23 percent in the last three months of that year.

“Vacancies continued to rise despite what has traditionally been a strong leasing period for apartment properties,” said Victor Calanog, director of research at Reis.

These numbers are fairly surprising, in that, many forecasted that as the jobless rate rose, the amount of apartment vacancies would decrease; (it was assumed that prospective homebuyers, in fear of an unstable economy/job market, would resort to renting).

The good news is, when demand is low and supply is high, down come the prices.

Here are some related stats from Reis:

Asking rents for apartments fell 0.6 percent in the second quarter from the first, matching the rate of change in the first quarter, the biggest drop since Reis began reporting such data in 1999.

Asking rents dropped 0.7 percent from a year earlier to an average $1,040 a month.

Rents paid by tenants, also known as effective rents, fell 0.9 percent from the previous quarter to $975. Effective rents were 1.9 percent lower than a year earlier.

In reviewing the data, it seems as though cities that who were boosted by either the tech or housing boom (San Jose, San Francisco, Las Vegas, Southern California’s Orange County and Seattle) have been seeing the overall effective rents fall.

The vacancy rate increased the most in Tucson, Arizona, by 1.5 percent to 9.9 percent, followed by Charlotte, North Carolina; Little Rock, Arkansas; and Richmond, Virginia.

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