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Wednesday, July 02, 2014

Reis: Apartment Vacancy Rate unchanged in Q2 2014 at 4.1%

by Calculated Risk on 7/02/2014 09:51:00 AM

Reis reported that the apartment vacancy rate was unchanged in Q2 at 4.1%. In Q2 2013 (a year ago) the vacancy rate was at 4.3%, and the rate peaked at 8.0% at the end of 2009.

Some interesting comments from Reis Senior Economist Ryan Severino:

Vacancy was unchanged during the second quarter at 4.1%, a slight worsening versus last quarter. Over the last twelve months the national vacancy rate has declined by 20 basis points, slightly below the pace of the last few quarters. We have been anticipating this slowdown in vacancy compression as demand moderates while supply growth accelerates. The national vacancy rate now stands 390 basis points below the cyclical peak of 8.0% observed right after the recession concluded in late 2009. However, at 4.1%, the national vacancy rate remains low by historical standards. The only time vacancy in the US was lower was during the boom‐and‐bust days of 1999 and 2000.

Demand remained relatively strong during the second quarter, as the sector absorbed 35,102 units. This is down slightly versus last quarter's 40,853 units absorbed but was the largest figure for a second quarter since 2011. Year to date, net absorption is tracking ahead of last year's pace, indicating that demand remains resilient even after more than four years of an apartment market recovery.

Completions during the second quarter totaled 33,210 units. This is a rebound from the first quarter, when construction activity was likely muted by severe winter weather. The overall trend in construction is clearly upward. Despite first quarter's severe winter weather, new construction is already ahead of last year's pace. The market remains on track to deliver the highest level of new completions since 1999 when the economy was growing at a far faster pace than it is today.
Asking and effective rents both grew by 0.8% during the second quarter. This is an increase from growth during the first quarter which now appears to be just a temporary slow down, likely due to seasonal factors. Rent growth, though weak by historical standards given such a low vacancy rate, continues to accelerate.
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.

Apartment vacancy data courtesy of Reis.