| NEW YORK
NEW YORK Oct 1 Finding an apartment to rent got
even harder in the third quarter, as the U.S. apartment vacancy
rate fell to its lowest level in more than a decade, according
to an industry report released on Tuesday.
The national apartment vacancy rate fell 0.1 percentage
point to 4.2 percent in the third quarter from the second
quarter, according to a preliminary report by real estate
research firm Reis Inc.
It was the lowest vacancy rate since the third quarter of
2001 when it was 3.9 percent. Some 47 out of 79 markets that
Reis tracks posted vacancy decreases.
Despite the decline in the vacancy rate, a weak job market
and stagnant wages have prevented a commensurate rise in rents,
While the average U.S. effective rent in the third quarter
grew by 1 percent sequentially, and 3 percent year-over-year,
the increase in rent was less than what would have been expected
in such a tight market, Reis said.
Effective rent is the rent landlords receive after months of
free rent and other perks.
"Demand has been so strong to push vacancy rates to such a
low level, yet we haven't seen rent growth of the magnitude we
would normally expect," Reis Senior Economist Ryan Severino
With such a low vacancy rate, effective rent would have been
expected to grow by about 4 percent to 5 percent year-over-year
but was stymied by lack of job and income growth, Severino said.
"If median household income is growing at somewhere about 2
percent a year, give or take, once you back out inflation how
much money is left for increased spending on rent? Not a lot,"
Net absorption, the number of apartments rented over those
that are unoccupied, reached 40,392, the most so far this year
and 54 percent higher than a year earlier.
New construction that is expected to come on line next year
may fuel a rise in the vacancy rate and could slow the increase
in rental rates, Severino said.
Over the past five years, the apartment sector has been the
beneficiary of the U.S. housing bust, the economic recovery,
high mortgage requirements, and a constrained supply of new
Those factors have pushed down the vacancy rate and
allowed apartment owners, such as Equity Residential,
Essex Property Trust Inc and AvalonBay Communities Inc
to raise rents.
Rising mortgage rates in the third quarter also dampened
homeownership, forcing people to rent longer.
The 4.2 percent average vacancy rate in the third quarter
was down from 4.3 percent in the prior quarter and from 8
percent in late 2009.
At 2 percent, New Haven, Connecticut had the lowest vacancy.
Memphis, Tennessee had the highest vacancy rate, at 8.2 percent.
The average asking rent rose 0.9 percent in the third
quarter to $1,121.16 per month. The average effective rent was
San Francisco and San Jose, U.S. capitals of the technology
industry, saw the highest effective rent increase, both up 2.2
percent to $2,043.02 per month for San Francisco and $1,685.72
for San Jose.
New York remained the most expensive place to rent in the
United States with an average effective rent of $3,049.37 per
month, up 0.9 percent. The cheapest was Wichita, Kansas, at
$528.95 per month, up 0.8 percent.