Thursday, January 05, 2012

Reis: Apartment Vacancy Rate falls to 5.2% in Q4, Lowest since 2001

by Bill McBride on 1/05/2012 12:36:00 AM

Reis reported that the apartment vacancy rate (82 markets) fell to 5.2% in Q4 from 5.6% in Q3. The vacancy rate was at 6.6% in Q4 2010 and peaked at 8.0% at the end of 2009.

From the WSJ: Apartment-Vacancy Rate Tumbles to 2001 Level

The nation's apartment-vacancy rate in the fourth quarter fell to its lowest level since late 2001 ... In the fourth quarter, the vacancy rate fell to 5.2% from 6.6% a year earlier and 5.6% at the end of the third quarter, according to Reis.

During the depths of the downturn, landlords had to offer incentives such as flat-screen TVs and months with no rent to attract tenants. But in the fourth quarter of 2011, landlords in 71 of the 82 of the markets that Reis follows were able to raise rents. ... Nationwide, landlords raised asking rents an average of 0.4% in the fourth quarter, to $1,064 a month. That's up from $1,026 in 2009.

But rent increases showed signs of moderating in some markets and, overall, they were less than Reis had expected.
Apartment Vacancy Rate Click on graph for larger image.

This graph shows the apartment vacancy rate starting in 2005.

Reis is just for large cities, but this decline in vacancy rates is happening just about everywhere. More from Bloomberg: U.S. Apartment Vacancies Decline to a Decade Low of 5.2%, Rents Increase
“The sector is benefiting from some of the lowest figures for new construction on record,” Calanog said. “By 2013, the influx of new units may begin eroding any benefit the sector derives from tight supply conditions.”

A total of 8,865 new units became available in the fourth quarter, the second-fewest for any three-month period in Reis records dating to 1999. The first quarter of 2011 had the fewest units, at 7,473.

For all of 2011, 37,678 units were completed, the lowest annual total in 31 years of Reis data. The previous record was 49,303 in 1993 during the savings and loan crisis.
A few key points we've been discussing all year:
• Apartment vacancy rates are falling fast.

• A record low number of multi-family units were completed in 2011.

• Multi-family starts are increasing, and that is helping both GDP and employment growth this year. These new starts will not be completed until 2012 or 2013, so vacancy rates will probably continue to decline.