Apartment Vacancies Highest in 23 YearsApartment Complex Life
A recent report from Reis, a real estate research company, announced that the number of vacant apartments were at a 23 year high. Although many landlords were offering lower rental rates to tenants, the vacancy rate rose to above 7.8 percent in the third quarter of 2009. The vacancy rate can be attributed to an increased supply of available rental housing, an increased amount of families that are combining households, and the housing tax credit, which is luring some renters away from apartments.
Unemployment and Apartment Vacancies
With a rising unemployment rate, some renters are unable to afford apartments any more. Even though landlords have been reducing rates and have been offering incentives like free rent, this is often not enough. Some families have doubled up, moving in with family members to save on the cost of housing. Other homeowners, needing a little extra help in paying their mortgages, have taken on boarders, freeing up more living space. An increase in homelessness is also adding to the number of vacancies.
Foreclosures and the Rental Market
One of the factors that is contributing to the increasing vacancy rate is the number of homes in foreclosure, or that are in danger of foreclosure. Although the housing crisis initially created a higher demand for apartment rentals, some foreclosed homes are now being rented out. Other homeowners have chosen to rent out their homes after they move to a new location; because of the drop in housing prices, they have difficulty selling their homes, and choose to rent out the houses instead of foreclosing or going through a short-sale. Some renters who would otherwise be renting apartments find the prospect of renting a home more desirable, and choose the house instead.
The Housing Tax Credit
The housing tax credit, available to people who have either never owned a home, or are buying a home for the first time in more than three years, offers buyers an incentive of up to $8000 to buy a home in 2009. Many of these home buyers had been renting apartments. These buyers contribute to the apartment vacancy rate. Although some of these new buyers would have purchased a new home even without the tax incentive, the tax credit has increased the number of new buyers.
Market May Not Turn Around Until 2010
Reis does not believe that the vacancy situation will not get any better until the second quarter of 2010. It may take even longer than that for the market to turn around. More buildings are continuing to enter the market, which makes the situation worse. More than 100,000 new rental units are likely to have entered the market in 2009. They expect that the vacancy rate is likely to pass 8 percent in either the last quarter of 2009, or in 2010. If that happens, that will be the largest vacancy rate since 1980, when Reis began tracking rates.