NEW YORK, Oct 2 (Reuters) - The withering U.S. housing market and tougher mortgage standards strengthened demand for apartments to rent in some areas in the third quarter, while in other markets it stepped up competition for tenants, real estate research firm Reis said.
“National results are healthy, but not overwhelming when you consider the seasonal strength of the third quarter,” Reis chief economist Sam Chandan said in a statement.
Nationwide, the U.S. apartment market remained sturdy, as the vacancy rate fell 0.20 percentage point from the previous quarter to 5.6 percent.
Meanwhile, effective rent -- the amount paid net of any free months or other incentives -- rose 1.4 percent from the previous quarter to $964 per month, the biggest quarterly increase since the third quarter of 2006, according to Reis.
“The interesting story is in the conversion markets -- Las Vegas and Phoenix are showing signs of weakness now, as well,” Chandan said.
Las Vegas saw apartment vacancies rise 0.50 percentage point to 5.3 percent and Phoenix saw the rental vacancy rate rise 0.40 percentage point to 7.8 percent, as investors and second-home buyers sought to rent their condominiums and homes rather than sell them at a loss.
Other once-hot home buying markets, such as Fort Lauderdale and Orlando in Florida, saw vacancies spike.
Orlando’s vacancy rate rose 0.50 percentage point to 6.8 percent. Fort Lauderdale saw the greatest increase, 0.60 percentage point to 4.6 percent, and the weakest rent growth, flat from the prior quarter, Reis said.
Memphis, Tennessee was the worst market in terms of vacancies, with a rate of 10 percent in the third quarter.
However, the credit market crisis, which has made mortgages, particularly larger ones, more expensive and tougher to get, has been a blessing for some local apartment markets.
“In terms of the strongest markets, demand is picking up in markets where the higher jumbo mortgage rates are pushing housing costs -- the same time as buyers hesitate because of the potential for further price declines,” Chandan said.
New York had the lowest vacancy rate, at 2.2 percent in the third quarter, and the highest effective rent growth, at 3.6 percent. Fairfield County, Connecticut; Long Island, New York; Central New Jersey; and Orange County, California followed with vacancy rates at 3.2 percent or less.
California’s San Francisco and San Jose saw effective rent grow more than 3 percent over the prior quarter.