NEW YORK (Reuters) - The U.S. apartment vacancy rate was unchanged in the second quarter, the first time in two years that the vacancy rate failed to tighten, in a sign that a wave of new properties may be easing market conditions, according to real estate research firm Reis Inc.
The national vacancy rate was 4.3 percent, unchanged from the prior quarter though down from 4.8 percent a year earlier, according to preliminary figures Reis released on Monday. The vacancy rate is 3.70 percentage points below the cyclical peak of 8.0 percent at the end of 2009.
“The apartment market has been on a spectacular run,” Ryan Severino, senior economist for Reis, said. “It’s been an awesome recovery since early 2010.” But with more new properties being developed, he said, “and there are only so many people who can rent units, it has to slow down.”
Asking rent during the second quarter rose by 0.6 percent to an average $1,109.73 a month. A year earlier, rents jumped 1.1 percent.
New York City remained the most expensive market. Average rents for the city’s four largest boroughs - Manhattan, Queens, Brooklyn and the Bronx - rose 1 percent to $3,017.19 a month, the first time the average rent topped $3,000 since Reis began collecting data in 1980. (The firm did not include New York’s smallest borough, Staten Island.)
The average New York rent was more than 50 percent higher than second-place San Francisco, where rent grew 1.1 percent from the first quarter to $1,998.82. Oklahoma City was the cheapest market, at an average of $571.03 a month, up 0.6 percent.
During the second quarter, developers added 26,584 new units to the U.S. apartment market, about the same as the first half of last year and 22.8 percent more than the first half of 2011.
The rolling four-quarter average of newly built apartment units has been increasing since hitting bottom at 10,600 in the 2011 fourth quarter, and stood at 23,200 in the 2013 second quarter.
So far, the demand from tenants has outstripped the new supply, but with more new developments due to hit the market in the second half of this year and next year, at some point the market will shift.
“It’s not going to be this massive collapse in vacancy,” Severino said. “You’ll probably see vacancy rates tick up a little bit. And it will stay a landlord’s market. It will stay sub 5 percent vacancy.”
The overall rise in rents echoed a trend reported by several large apartment owners, such as Equity Residential and AvalonBay Communities Inc, for the past several quarters.
Effective rent, which includes months of free rent and other enticements offered by landlords, rose 0.7 percent to $1,061.94 a month in the second quarter. A year earlier, effective rent grew 1.3 percent.
On a year-over-year basis, 65 out of 79 markets Reis tracks posted a vacancy decline and rents in every single market rose.
Reporting by Ilaina Jonas; Editing by Leslie Adler