U.S. rental market on the rebound, report says
Home sales might be in lackluster shape these days, but the U.S. rental market is on an upswing, according to a report released Wednesday.
Apartment building vacancy rates fell sharply in the third quarter, as renters filled 84,382 more units than were vacated, according to the report on preliminary trends by New York-based Reis Inc., a real estate research firm. Asking and actual rents were up.
“Despite lackluster economic growth and continuing uncertainty in the labor markets, households appear to be retuning in droves to the rental market and signing leases,” the report said. “This reflects some optimism about an improving job market: it may take individuals anywhere to from six to nine months to find a job, but that is far better than the situation in early to mid-2009, when the nation was shedding hundreds of thousands of jobs a month.”
The report covers a period -- July, August and September -- in which sales of newly built and previously owned homes suffered following the expiration of a popular tax credit for buyers. Many economists expect weak sales and price drops this year.
But one recent point of optimism for home construction has been the apartment building sector. The government recently reported that construction of newly built homes jumped a surprising 10.5% in August from July, with most of the increase coming from the volatile sector of apartment buildings and condominiums.
“There has been a shift in the mix of residential structures [being built] because the economy and recovery is so sluggish, you see more renters,” Chris Christopher, an economist with consultancy IHS Global Insight, said.
The report by Reis showed national vacancy rates in apartments falling to 7.2% in the third quarter from 7.8% the previous quarter. That was one of the sharpest drops in vacancies on record, with the only other comparable time being in the third quarter of 2005, when the supply of apartment buildings quickly shrank as building owners converted them into condominiums to satisfy the boom-era thirst from home shoppers.
Asking and effective rents rose 0.5% and 0.6%, respectively. The report did not give a dollar figure to complement the percentage increases in rent. It did say that the increase in effective rents outpacing what landlords are asking potential tenants indicates that concession packages -- such as months of free rent -- are tightening.
“We now have three quarters’ worth of data showing that the apartment sector bottomed in the fourth quarter of 2009, with a strong recovery underway,” the report said.
Newly completed apartment buildings came to market nearly half-empty in the third quarter, the one sore spot in the report.
-- Alejandro Lazo