Jan 8 U.S. apartment vacancies declined and
rents rose again in the fourth quarter, continuing a years-long
trend that is likely to encourage more affluent renters to
become home buyers this year, according to real-estate research
firm Reis Inc.
The national apartment vacancy rate dropped to 4.5 percent
in the last three months of 2012 from 4.7 percent in the
previous period, marking three straight years of vacancy
declines, according to Reis data released on Tuesday. It was the
lowest vacancy rate since the third quarter of 2001, according
to Reis data.
As demand for new rentals outpaced new construction, the
average asking rent of $1,097 and the average effective rent of
$1,048 were both up 0.6 percent from the prior period, Reis
said. It was a smaller increase than in the third quarter, but
marked the twelfth straight quarter of rising rent.
"The market has tightened considerably over the last few
years and at this point in the cycle a slight slowing should be
anticipated," said Ryan Severino, senior economist at Reis.
However, he called the 45,162 units that were leased during
the quarter "a strong showing," because the rental market has
already been tightening for such a long period, and because the
fourth quarter is typically a slow period for new rentals.
In theory, the more expensive it becomes to rent, the more
likely residents are to save money and purchase a home instead
-particularly since mortgage rates are near historic lows and
prices are still down in many markets.
But several factors have counteracted a potential surge in
U.S. homeownership, including stricter lending standards by
banks, weakness in the labor market and a broad deleveraging of
U.S. consumers following the subprime mortgage crisis.
As a result, Reis expects rent to march even higher in 2013,
with fewer vacancies, even as a substantial amount of newly
constructed apartment buildings come onto the market. Yet the
firm does expect to see more affluent consumers in expensive
markets take the plunge into buying a home this year, after
facing sharp rent hikes for the past few years.
"You're starting to see the initial signs of rent versus own
calculus that takes place," said Severino. "You're starting to
see it in New York and San Francisco, where people are paying
$3,000, $4,000, $5,000, a month to rent. They look at it and
say, 'All right, I'm already dealing with 8 percent, 10 percent
rent increases from year to year, how much longer do I really
want to put up with this from landlords?"
New York continued to be the tightest rental market in the
U.S. last quarter, with a 2.1 percent vacancy rate, which was
flat compared with the third quarter. It also had the highest
effective rent, of $2,985, on average, down 0.2 percent from the
Jacksonville, Florida, posted the biggest decline in vacancy
rate from the previous quarter, dropping 0.7 percentage points.
Houston residents experienced the highest rent increases, up 1.3
percent to $787. Only nine of the 79 metro areas tracked by Reis
posted an increase in vacancies, while just four markets
reported a decline in rent.
The trends have helped landlords such as Equity Residential
, Post Properties Inc, UDR Inc and
AvalonBay Communities Inc, which have large
concentrations of high-end apartment buildings in urban areas.