Housing Crisis Causes Rising Rents, Declining Apartment Vacancies

By Ilaina Jonas

NEW YORK - The vacancy rate for U.S. apartments posted a steep decline in the first quarter and rents crept higher as the job market improves and many Americans remain unwilling or unable to buy a home.

Reis Inc's quarterly report showed the vacancy rate dropped to 6.2 percent in the first three months of the year, down from 6.6 percent in the fourth quarter. It was the steepest fall since the commercial real estate research firm began tracking the market in 1999.

Increased employment, especially for 20- to 34-year-olds, is spurring demand for housing. Many of those newly employed younger people, however, cannot come up with the tens of thousands of dollars often needed for down payments, turning them into renters.

"All of those things are reflecting in the home ownership rate that is still somewhat declining, and it's generally favoring the rental market," Victor Calanog, Reis' vice president of research and economics, told Reuters.

New renters plowed into an apartment market where supply grew by only a net 44,184 units. New construction, at just a touch over 6,000, was about a quarter of normal for the first quarter in recent years. Such an imbalance, if it persists, could make it easier for landlords to raise rents.

"If this is a harbinger of what's to come for the next quarter, then it certainly is good news for landlords and investors and multifamily properties as a whole -- maybe not for renters," Calanog said.

So far, however, monthly rents appear relatively stable, with the average rent up only 0.5 percent in the quarter to $991 a month, with increases in 75 of the 82 markets that Reis tracks.

This increase reflects the willingness of a sizable, but diminishing, number of landlords to offer free rent, typically for one month or less, to attract tenants.

Rents in high-demand areas are nonetheless set to rise, with possible double-digit increases this year in Manhattan's Upper East Side and Washington, D.C.'s Dupont Circle areas, Calanog said.

That would be good news for landlords such as Equity Residential (EQR.N), UDR Inc (UDR.N), AvalonBay Communities Inc (AVB.N), Archstone and Related Cos, which own apartment buildings in densely populated U.S. cities.

New York had the nation's lowest vacancy rate, 2.8 percent, and its highest average rental, $2,794 a month.

At the opposite end of the spectrum, Memphis, Tennessee had the nation's highest vacancy rate, 11 percent. The average rent there was $634 a month. (Reporting by Ilaina Jonas; Editing by Tim Dobbyn)

Copyright 2011 Thomson Reuters. Click for Restrictions.

Comments

[Maranda MassieGuthrie]

07:28 PM on 04/14/2011

yes, but the problem here in OHIO is that the banks are being jerks to the home builders and developers and not letting them get the financing needed to build more living for people..thus hurting many industries, and families not wanting to live in a run down foreclosed dumps for rent!

[William Brock]

12:34 PM on 04/09/2011

The Japanese debre field is headed for the west coast of America full of houses....maybe we can find a nice place to live......

[Bloomfielder]

12:33 PM on 04/09/2011

I've known several renters who found it cheeper than paying mortgage and property taxes.
In the near future, homeowners may try this new option:
http://ecorealty.blogspot.com/2011/04/paint-your-home-and-get-your-mortgage.html

[Logan Mohtashami]

09:02 AM on 04/08/2011

http://www.businessinsider.com/the-future-aint-what-it-used-to-be-predictions-for-the-2011-real-estate-market-2010-12/

more housing articles at www.LoganMohtashami.com

[Realtors Are Liars]

10:31 PM on 04/07/2011

Record High Defaults=C­HECK

Record High Foreclosur­es=CHECK

Record Low Sales=CHEC­K

Record Price Declines=C­HECK

Folks,

DO NOT buy any housing right now.

There is no stabilizat­ion in housing until we get back to early 1990's prices, possibly even early 1980's.

Let housing prices and rents collapse and don't get in the way.

[themainpoint]

09:24 AM on 04/08/2011

Good advice.

[UnknownSolider]

10:32 AM on 04/08/2011

So genius can you tell us where people are going to live? In places like New York City either you rent your apartment or you buy it, there is no middle ground.
 
If people are not buying for living purposes, then that means they are renting, either you are tenant or a landlord........
 
I prefer the landlord arrangement, which means you should be looking to buy

[Realtors Are Liars]

05:22 PM on 04/08/2011

Inventory up=prices down.

Get used to it my desperate LoanOwner.

[Nick9075]

09:38 PM on 04/07/2011

{{{Increased employment, especially for 20- to 34-year-olds, is spurring demand for housing. Many of those newly employed younger people, however, cannot come up with the tens of thousands of dollars often needed for down payments, turning them into renters.}}}

Will this 'increased employment' be enough to pay the rent??? Rents are sky high now and landlords require nearly perfect credit and a stable job history. Not to mention that many in this age group have sky high student loan debt & payments, sky high credit card & auto loan debt and generally have a very lax attitude toward paying bills.. One survey said over 60% of those surveyed in their 20's are typically or usually late on paying bills due to overspending.

An entry level salary of $50,000 or so is hardly enough to afford the rent (and everything else that this group feels entitles to) without handouts from mommy & daddy

[jaredbrain]

01:39 PM on 04/08/2011

you sound a little bitter. i'd settle for making anything thanks, especially if I could manage to get some health insurance, but I guess that's a pipe dream because all 20somethings are entitled brats

[Nick9075]

09:33 PM on 04/07/2011

In and around the Boston area rents are sky high. You have to travel at least 30 miles outside the City to find an apartment for less than $1,800 a month.. Boston itself is getting to be as expensive as NYC because of the huge number of rich college kids who are somehow able to spend $2,500 - $3,000 a month in rent.

As is the case with NYC & many other cities you have many applications for each apartment that becomes available. Landlords won't rent to anyone with anything less than perfect credit without a parental guarantee & cosigner and sometimes require 12 months of rent upfront

[Realtors Are Liars]

10:12 PM on 04/07/2011

False Nickl30.

Rents are falling in NYC and Boston. And I'll be right there... everywhere on the net calling you out on your lie.

[Nick9075]

10:16 PM on 04/07/2011

Uh, real life is different than your 'beliefs' on the net. Boston & NYC never go down because of the huge concentration of wealth from financial services and high paying union jobs (ex. a school custodian gets paid more than a teacher). In NYC the average is over $2,800 citywide (not just Manhattan). Most of eastern Massachusetts is close to the $2,000 figure as well.

[joni brit]

02:07 AM on 04/08/2011

and forget about buying there!!! it's sky sky high

[talos72]

05:58 PM on 04/07/2011

I am not so sure the trend is universal. In Los Angeles there is still plenty of vacancies for apartments where 10 years ago you could hardly see any. Plus, a such high rent prices people simply may move away from congested areas.

[Realtors Are Liars]

02:56 PM on 04/07/2011

Factually, rental rates are falling in every single statistical area measured by the Fed Reserve, Bureau of Labor Statistics and the Census Bureau.

[Nick9075]

10:22 PM on 04/07/2011

Rents are not falling. Go into any real estate office in NYC and try to suggest rents are falling. If you aren't thrown out, the real estate agent will pass out from laughing. Do you have any idea what apartments rent for now even outside Manhattan or outside any of these 'statistical areas'?? 20 years ago, middle class people could live in a safe area outside of the city, now its having to commute 2 hours each way due to skyrocketing rents & housing prices

[Realtors Are Liars]

10:24 PM on 04/07/2011

Rents are falling in NYC, Westchester and Fairfield counties. I WORK in a real estate office.

[sandrita mason]

01:46 PM on 04/07/2011

I see loads of condos in the LA/Long Beach area on the market for $350,000-$400,000. These units are nothing special-on noisy streets, with no yard or view. They're basically boxes with a granite counter top and stainless steel appliances. Eventually, these overpriced apartments will have to be converted to rentals. And, the rent will have to be at a point renters are willing to pay. Or else, they'll stay empty.

[Nick9075]

09:35 PM on 04/07/2011

Its the same in any large city plus you get the benefits of sky high auto insurance rates & sky high prices for groceries as well. Public transport is only good during rush hour as my experience over 30 years in NYC. After rush hours you have slow & infrequent service, crowded subways, rude people who take up two seats

[Trustfunded1]

08:40 AM on 04/07/2011

NYC isn't a good barometer for the rest of America.

This arrticle and it's microcosm economy is a little out of the bell curve.

[FreedomCorpse]

05:58 PM on 04/07/2011

a cracked bell curve at that

[talos72]

05:59 PM on 04/07/2011

Agreed. For example, at the west coast especially in California the story is somewhat different.

[Peter007]

08:17 AM on 04/07/2011

Housing has always been a cyclical industry. This cycle happens to be bigger and will probable be longer than the average.
Its still a cycle and housing will become unaffordable due to high prices sometime in the future.

[mgrant33301]

06:34 AM on 04/07/2011

what's remarkable is that the graph showing real estate listings for sale vis a vis pending sales shows that the gap is closing quickly. in essence, inventories are declining quickly in the florida market while pending sales are rising. frankly, this is very good news for sellers and the economy.

let's hope it continues.

[frank day]

08:17 AM on 04/07/2011

huh? what graph?

[mgrant33301]

06:28 AM on 04/07/2011

this is old news. duh.

[joni brit]

04:09 AM on 04/07/2011

it also failed to mention, when you own in NY city you are responsible for massive homeowner fees. When you buy, it's for cash, perhaps, a very small mortgage, because the upkeep, is astronomical, and it's a co-op, so if you renovate, and get rowdy, you better plan on painting your downstair's neighbors ceilings also!! Grumpy, we're on the same page, why pay $2500 a month on a mortgage, for a depreciating asset, and be paying for someone else's kids education, and supporting the Banks? In the burbs, $2500, gets you a lot of rental now adays.

[pep1]

07:04 AM on 04/07/2011

depends on where you buy in the city... where I live? VERY large apt. Cheaper than rent. 30 minutes to midtown, walking distance to bus, subway any and all forms of supermarkets

[joni brit]

07:19 AM on 04/07/2011

crazy beans....bet you live henry hudson west side, somewhere around columbia presbyterian and 125th ....right ???? That's where I would buy...

[sixletters]

06:16 PM on 04/08/2011

This is a good topic for me, I'm moving to NY at the end of the summer. Is it a good idea to own a car in NY? I've heard varying opinions. I just happened to have purchased a car earlier this year.

[KDMac]

01:34 PM on 04/07/2011

Wow, our house payment is half of that, for a 3 BR, 3 BA, three-story house in the suburbs. (Of course, I'm sure wages are higher where you live.)

[pep1]

09:43 PM on 04/08/2011

And you have the expense of a car, maybe 2 of them plus RR fare to get to work... an