3rd Quarter 2009 Vacancy Hits 7.8%

By E-Renter Tenant Screening
Posted on November 5, 2009 under Housing Trends | Be the First to Comment

Where are all the tenants? Some are moving back home with mom and dad. Or returning to school and living with relatives. Others took in roommates to help pay the rent, or are staying with friends temporarily.

These are some of the reasons tenants are out of the rental market, causing the U.S. apartment vacancy rate to rise to 7.8% in the 3rd quarter. This 23-year high occurred despite landlords nationwide lowering rents. Reis, Inc., a real estate research firm that published the vacancy report, stated that the peak has not yet been reached; they expect the number to climb above 8% in the coming months.

Nervous landlords are looking toward the traditionally slow 4th quarter with little hope for improvement, which is expected sometime in 2010—perhaps as soon as the second quarter.

While vacancies increased, rents have declined for four quarters in a row—which may have kept the vacancy rate from soaring even higher. Landlords have responded quickly to market conditions, including over supply, and lowered rents to keep tenants. Rents are expected to stay soft for at least another year.

Oversupply will continue to be a contributing factor to the vacancy problem. 73,000 apartment units have come on the market in the first three quarters of 2009, and 42% of them remain vacant, according to Reis.  The bright spot is that new apartment construction has slowed down to a trickle, so eventually, demand will catch up to supply.

As unemployment hovers near 10% nationwide, and benefits start running out, rent money is disappearing, too. Simply put, folks with no rent money cannot be tenants. Landlords will need to continue aggressively seeking out new tenants to fill vacancies, offer incentives to good tenants to get them to stay, and hold on until the job market improves—when there are more people with money to spend on housing.