Apartment Market Strengthens, As Larger Housing Woes Mount

The best time to sign a lease may have just passed, as the apartment rental market has strengthened, Bloomberg reports. Good news for landlords, bad news for tenants.

Vacancies in U.S. apartments declined in the third quarter, which ended last Thursday, for the first significant yearly drop since 2007, says Bloomberg, citing data from Reis Inc. The vacancy rate fell to 7.2 percent from 7.9 percent a year earlier. The national vacancy rate hasn't been this low since the fourth quarter of 2008, when it was 6.7 percent, according to Bloomberg.

But landlords, and especially developers, shouldn't be too optimistic. Americans are slow to move into new apartment developments, which had an average vacancy rate of 60 percent in the third quarter, according Bloomberg notes. 90 percent of the increase in occupied apartments came from previously existing units.

The move to rentals came as foreclosures reached an all-time high. August saw more Americans lose their homes to foreclosure than in any other month on record, as banks repossessed 25 percent more properties that month than in August of the previous year. More recently, foreclosure proceedings across the nation have been tarnished with doubt, as GMAC, JPMorgan Chase and Bank of America all admitted they didn't properly review all foreclosure documents. As HuffPost's Arthur Delaney reports, House Speaker Nancy Pelosi called Tuesday for an investigation into foreclosure fraud.

The rental rally, moreover, could actually be an indicator of a weak housing recovery, as consumers abandon permanent homes.

Comments

[scottsdalebubbe]

10:43 PM on 10/07/2010

Folks, there is equal opportunity blame all around. Namely, over paying for buildings and over-leveraging on loans that re-set in 5 to 7 years then became marginal performers (too much debt, no cash flow). It was gambling, pure and simple that the bubble would continue and the investor could make up the difference by selling to the next "greater fool". They and the lenders forgot the fundamentals (these Ivy-League graduates): when you are buying an investment property, you are buying cash flow -- nothing less, nothing more. You make money on the buy.
In some markets, like Phoenix, add overbuilding, the huge Hispanic exodus after a voter-approved initiative in 2008 and SB 1070 in 2010 and we now have over 5,000 units taken back by lenders and another 4,000+ units coming up for foreclosure, plus the glut of condo conversions that never sold. And I only track buildings with 50 or more units.
Institutional buyers are swarming, buying up Class A properties with 200 or more units including unfinished "luxury" buildings. Recovery? Where? When? It's a buyer's market. Come on down!

[zingdaddy]

04:38 PM on 10/06/2010

Why anyone would vote Republican after what those people did to our economy is a mystery to me. They're like someone who loves the thugs who robbed them and beat them up, and then blames the doctor for their wounds and destitution and rages at the medical care, and who does all in their power to protect the thugs from the cops. After all, they still have a little more to steal, and a few bones were left unbroken.

Must be Stockholm Syndrome.

[hypnotoad72]

05:37 PM on 10/06/2010

100% agreed

[rebel9999]

01:59 PM on 10/06/2010

Great news. Obama can hang his hat on jump-starting the apartment market.

[av10]

03:27 PM on 10/06/2010

Bush owns that dubious claim to fame. Besides, Teabaggers welcome this type of news.

[LonosCurse]

05:21 PM on 10/06/2010

deranged.