We’re approaching historically unprecedented bargain levels for people renting apartments, which is bad news for landlords but great news for people looking to sign a new lease. The vacancy rate for apartments hit a three-year high in the first quarter, and landlords dropped rents by the most in at least a decade.
Lots of commentators thought there might be some kind of renter squeeze as over-mortgaged homeowners defaulted and became renters. That’s not happening. And the figures are forecast to get even better as supply ramps up thanks to new apartment buildings set to open this year, according to real estate research firm Reis Inc. Unemployment is also helping drive rents down.
“Given that things are weakening right now, any new buildings that come on will add additional pressure to landlords,” Victor Calanog, Reis director of research, said.
The national apartment vacancy rate rose to 7.2 per cent in the first quarter, up 0.60 percentage points from the prior quarter and 1.1 percentage points from a year earlier, according to the report, released on Tuesday.
Since reaching a cyclical low of 5.5 per cent in the third quarter of 2008, the U.S. apartment vacancy rate has surged 1.7 percentage points, Reis said.
It was the highest vacancy rate since the first quarter of 2002. That was right before the last downturn bottomed out, but Reis expects the picture to get a lot darker as “we are arguably only at the beginning of the current downturn.”
It’s funny how this kind of “bad news” story is always written from the point of view of landlords. That’s not surprising, since that’s who probably pays real estate reserach firms. Nonetheless, it doesn’t mean you have to adopt this point of view. Here’s some more good news for renters:
- Asking rents–the amount landlords list apartments for–fell by 0.6 per cent to $1,046 per month. That’s the largest single-quarter decline since Reis began reporting quarterly performance data in 1999.
- Actual rent, which factors in “free months” and other freebies landlords use to lure renters, fell 1.1 per cent to a monthly rent of $984.
- Around 22,833 new apartments became available in the first quarter of 2009. The projected growth for 2009 is 90,000 apartments.
This is bad news for homeowners, of course. There was some hope that as home prices declined, homeownership would become more economically attractive compared with renting. But with rents plunging, the price of owning a home remains at historic highs.