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The Real Deal Miami

U.S. rental market is very strong, but trouble looms: report

October 06, 2011 12:59PM

As in the New York City market, rental vacancies nationally are way down and prices are up, according to a report by analytic firm Reis cited by the Wall Street Journal and Bloomberg News.

The national vacancy rate fell to 5.6 percent in the third quarter, the lowest figure since 2007, and 1.5 percentage points below where it stood during the same period a year ago. Meanwhile, the average rent rose to $1,004, from $997 in the second quarter and $981 in the third quarter of 2010.

A reduced demand among home buyers, displaced homeowners renting and a lack of new construction helped the third quarter numbers, but trouble looms for the national rental market.

Several years of little new department development — the third quarter saw just 8,200 new units hit the market, one of the lowest totals since Reis began tracking the figure in 1999 — could be coming to an end. Hundreds of thousands of new apartments are in the pipeline, and that excess supply should raise the low vacancy rate and put downward pressure on prices.

Moreover, a renewed weakening of the economy has slowed job growth and kept young potential renters from moving out of their parents’ homes, and made sharing apartments with roommates a more attractive option.

“The here and now looks good,” said Richard Anderson, a real estate investment trust analyst who covers apartment operators for BMO Capital Markets. “We’re worried about the next six to 12 months or so.” [Bloomberg] and [WSJ]