US apartment market worsens with economy

[marmar]

US apartment market worsens with economy--Reis
By Ilaina Jonas


NEW YORK, April 7 (Reuters) - The vacancy rate for U.S. apartments hit a three-year high in the first quarter and asking rents dropped the most in at least 10 years as the number of excess apartments on the market ballooned, according to real estate research firm Reis Inc.

And the figures are forecast to get even worse as more apartment buildings are expected to open this year, increasing supply, and as the U.S. employment picture gets uglier, Reis said.

Job creation is the No. 1 driver of demand for apartments.

"Given that things are weakening right now, any new buildings that come on will add additional pressure to landlords," Victor Calanog, Reis director of research, said.

...(snip)...

Behind the rising vacancy rate is a build-up of available apartments. The number of vacant apartments added was 31,878 units in the first quarter. This was the largest amount of excess apartments the sector has seen since the first quarter of 2002 and does not include empty condos for rent. ............(more)

The complete piece is at: http://uk.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUKN0640039620090407?pageNumber=1&virtualBrandChannel=0

[Fumesucker]

1. On the other hand, the rental market for lower cost homes is pretty hot, at least in my market..

People foreclosed out of McMansions are renting downscale homes at a great rate in my area (the SE)..

[ThomWV]

2. I would estimate 100% overbuilding in the closest town

There has been an apartment building boom in the town closest to me that is unexplainable. My son lives in a new complex of roughly 100 units of which less than 20 have been filled in the year that he has been there. He's moving out in a couple of weeks. Meanwhile building continues - albiet at a much slower pace. Incomplete apartment construction project abound as well as at least one half finished shopping center.

None of this would bother me a bit and in fact I welcome it in that rents in that town are far higher than they should be were it not for one fact. The apartments are eyesores.

[Uben]

3. Depends on location

I have both apartments and lower cost homes for rent. I also enjoy 100% occupancy at this time.....better than it has ever been! My properties are paid for and the rents are mid to low range. I do not believe the new units being built could survive if they rented their units at my rates. In fact, I know they couldn't! New units require 90%+ occupancy rates to be profitable. Mine requires less than 50% occupancy to be profitable. Looks like I might be finding some bargains in the days to come!

[KharmaTrain]

4. This Depends On The Region/Area

Here in Pleasant Valley Sunday, rentals are still a hot commodity. A big reason is that many former apartment complexes were flipped to Condo over the past 20 years...people were pushed toward buying rather than renting and the number units decreased. Also, many of these complexes changed so they wouldn't have to accept "Section 8" or low income families. Now, we have many who not only are looking, but another group that's finding it difficult to hold onto those apartments...rising rents or landlords kicking families out so he can get an extra $50 or $100 a month per unit. Those kicked out have little recourse and have to look far and wide...if they can find a unit they can afford.

The glut in this area is still single family homes...I can't think of an apartment complex that has been constructed in well over 25 years. The banks would rather leave shuttered homes shuttered...or to flip them rather than lease them.

I have read of some areas that do have a glut on apartments now as some former condos are opening up for rentals to cover the lack of buyers, but the rental market is still very tight as the more people who lose their homes struggle to find a place to land on their feet.