(Reuters) - The U.S. apartment vacancy rate in the first quarter fell to
its lowest level in more than a decade, and rents posted their biggest
jump in four years, as Americans eschewed home ownership and renting
retained its popularity, according to real estate research firm Reis
The national vacancy rate fell
0.30 percentage points in the first quarter to 4.9 percent, the lowest
level since the fourth quarter 2001, according to preliminary results
Reis released Wednesday.
asking rents jumped by 0.5 percent from the prior quarter to $1,070 per
month. Stripping away months of free rent and other perks designed to
lure or retain tenants, effective rent rose to $1,018 per month, up 0.9
percent, the largest increase since the first quarter 2008, Reis said.
"I think that rent growth will accelerate this year," said Victor Calanog, head of Research & Economics at Reis.
that may be short lived. About 150,000-200,000 new units are expected
be built next year. That supply likely will dampen rent growth next
year, especially in cities such as Salt Lake City and Austin, where
development is ramping up strongly.
that supply hits the market next year, we may find that this is the
year rent growth peaked," he said. "It's still going to be a great year
for apartment landlords."
apartment market has been the best performing sector of commercial real
estate over the past year, helped by the move away from home ownership.
Even though it is now cheaper to own than to rent, with interest rates
at record lows and inventories at record highs, most consumers are still
shut out of the market altogether.
half of homeowners who have mortgages are either in foreclosure,
delinquent on their mortgage payments, owe more on their mortgage than
their house is worth or have less than 20 percent equity in their home.
top of that, would be first-time homebuyers, are contending with
record-levels of student debt at the same time as they are trying to
raise down payments and meet lenders' strict new guidelines to qualify
Young first-time buyers have also been the recipients of recent job growth numbers, swelling the demand for apartments.
That has helped landlords such as Equity Residential(EQR.N), Post Properties Inc(PPS.N), UDR Inc (UDR.N)and AvalonBay Communities Inc(AVB.N), which have large concentrations of high-end apartment buildings in urban areas.
the increase in rent pales in comparison to the drastic fall in the
vacancy rate, down from a cyclical high of 8 percent at the end of 2008,
according to Reis.
For related graphics on the U.S. apartment market
please click on: link.reuters.com/dex47s
of the big gains in performance are in occupancy," Calanog said.
"You're actually not seeing very strong or robust rent growth at the
national level. Once vacancies dip below 5 percent you should expect
rent growth to be stronger than this."
the high-class properties in supply constrained urban markets, the
effects of weak job creation and absence of wage growth is affecting
"The vast majority of class B
and C properties have been improving occupancy but are having
difficulties in raising rents," he said.
New York City, the largest U.S. apartment market, the vacancy rate fell
to 2 percent in the first quarter, below the cyclical low of 2.1
percent last seen at the end of 2007.
there remained the highest of the 82 markets Reis tracks, at $2,885 a
month, up 0.3 percent for the quarter. It tied with Birmingham,
Greesboro/Winston-Salem, and Northern New Jersey, as posting the second
lowest increase. Rents in Fairfield County, Connecticut, fell 0.1
percent to $1,786 per month.
yearly basis, San Francisco apartment rent increased the greatest at 5.9
percent. In the first quarter, it rose 1.2 percent to $1,888 a month.
The cheapest place to rent? Wichita, Kansas at $503 a month, up 1.1 percent for the quarter, according to Reis.
(Reporting By Ilaina Jonas; Editing by Jeremy Laurence)