Thursday, January 05, 2017

Reis: Apartment Vacancy Rate declined in Q4 to 4.1%

by Bill McBride on 1/05/2017 01:11:00 PM

Reis reported that the apartment vacancy rate was at 4.1% in Q4 2016, down from 4.2% in Q3, and down from 4.3% in Q4 2015. The vacancy rate peaked at 8.0% at the end of 2009, and this is a new low for this cycle.

A few comments from Reis Economist Barbara Denham:

Showing continued resiliency, the national apartment vacancy rate declined to 4.1% from 4.2% in the third quarter and 4.3% at year-end 2015. Although net absorption (occupancy growth) was the lowest level in more than two years, new construction was also weaker. The fourth quarter statistics ... confirm that the pace of new completions has slowed after soaring over the last few years. Rent growth decelerated as well to a rate of 0.3% in the fourth quarter. Although the fourth quarter usually sees the lowest growth rates of the year, this quarter's results were the lowest since 2009.
...
Looking ahead, while new construction is expected to exceed demand (occupancy growth), we do not foresee a spike in vacancy rates. As mentioned above, recently surveyed data shows that the pace of completions has slowed while net absorption has stayed healthy. This means that prospective home buyers have not abandoned the apartment market as rapidly as many had thought would do so by this stage of the expansion.
emphasis added
Apartment Vacancy Rate Click on graph for larger image.

This graph shows the apartment vacancy rate starting in 1980. (Annual rate before 1999, quarterly starting in 1999). Note: Reis is just for large cities.

The vacancy rate had been mostly moving sideways for the last few years.  It appeared that the vacancy rate had bottomed, but this is a new low for this cycle.

Apartment vacancy data courtesy of Reis.