After setting a 20-year record last summer, the national apartment vacancy rate has risen even higher in the third quarter and there is no relief in sight for landlords through the balance of the year.
Driven by the moribund economy and competition with bargain basement home and condo prices, U.S. apartment vacancies rose to 7.8 percent in the third quarter, the highest rate since 1986, according to Reis Inc., a property research firm. Rates are
Actual rents paid by tenants fell by 2.7 percent from a year ago. Asking rents, or what landlords sought, fell 1.8 percent from a year earlier. Second-quarter asking rents fell 0.7 percent from a year earlier to $1,040 a month, and 0.6 percent from the prior quarter, the largest single quarterly decline since Reis began tracking quarterly data in 1999. When free months of rent and other incentives landlords are using to lure tenants are factored in, effective rent was down 1.9 percent from the prior year and 0.9 percent from the first quarter to $975.
Record job losses have hurt the apartment market, which largely relies on employment growth to fuel demand. Most tenants are 18 to 24-year-olds, and that group has been hardest hit by rising unemployment. The U.S. unemployment rate rose to 9.8 percent in August, the highest in 26 years.
The fall season traditionally has been a strong leasing period, but so far vacancies have continued to rise. Also, more than 100,000 units from new construction are scheduled to come onto the market by the end of the year. Some 47,000 units have already come on line this year. As a result of the soft demand and new supply, fourth-quarter vacancy figures are expected to be even weaker, and vacancy levels may hit all-time highs by the end of the year.