July 26, 2009

U.S. apartment vacancies near historic high: report – Yahoo! News

U.S. apartment vacancies near historic high: report – Yahoo! News

The U.S. recession has taken a toll on the U.S. apartment market, which largely relies on employment growth to fuel demand. Its largest tenant group, 18- to 24-year-olds, has been hardest hit by rising unemployment.

Meanwhile, the apartment buildings sector has led all commercial real estate categories on loan defaults. Second-quarter asking rent fell 0.7 percent from a year earlier to $1,040 a month, and 0.6 percent from the prior quarter, the largest single quarterly decline since Reis began tracking quarterly data in 1999. When free months of rent and other incentives landlords are using to lure tenants are factored in, effective rent was down 1.9 percent from the prior year and 0.9 percent from the first quarter to $975, Reis said. “If you’re a landlord right now at least you’re recognizing that things are tough,” Calanog said.

To maintain occupancy, many landlords, including Equity Residential, Apartment Investment and Management Co, AvalonBay Communities Inc and Mid-America Apartment Communities Inc, have sacrificed rental income and boosted concessions. For example, in New York, the largest U.S. apartment market, vacancies fell 0.5 percentage points to 2.9 percent, despite a 1.7 percent decrease in rent to $2,679 compared with just the prior quarter and a 4 percent fall compared with last year. “It’s very clear there’s some leasing going on, but it’s coming at the cost of a whole lot of concessions offered,” he said.

In other areas, such as Las Vegas, San Francisco and San Jose, California, effective rents dropped more than 2 percent from the prior quarter. Nationally, the picture may grow worse as the year progresses as Reis expects more than 100,000 units from new construction to come onto the market by the end of the year. Some 47,000 units have already come on line this year.

“With general expectations of an economic recovery pushed back to early 2010 at the earliest, it seems likely that apartments will have to endure a few more quarters of distress, lower rents and higher vacancies,” Calanog said.

Thanks to Burbed reader Herve for sending this in. I hate to say this though, but this is very misleading. You see, landlords haven’t really dropped the rent by 2% due to the poor economy here – they’re just dropping to rent to grab marketshare. As we all know, the #1 metric of success in business is marketshare and mindshare – this is Silicon Valley after all.

So please don’t be fooled. You may be thinking “lack of profit = bad” – but that’s last century thinking. In this New New New Economy, the paradigm has shifted. This would be even better if the landlords took on a big stack of debt to help gain even more marketshare! Debt = wealth!

Comments (17) -- Posted by: burbed @ 5:23 am

17 Responses to “U.S. apartment vacancies near historic high: report – Yahoo! News”

  1. UnrealAlex Says:

    It’s good to hear about the slumlords having a hard time. Of course if it’s California, their response will be to put a new facade on the front of the complex and raise the rents 20%.

  2. Real Estater Says:

    Folks are neither renting apartments nor buying houses. I guess parts of the U.S. population just disappeared!

  3. Alex Says:

    Market share growth trumps everything :p

  4. Alex Says:

    #2, people are ditching their apartments/houses and shacking together. 15 people in a 4 bedroom house. It’s the silicon valley way.

  5. anon Says:

    lol excreter and his unsupported conclusions.

    The proper conclusion is: there is more housing than necessary.

  6. Real Estater Says:

    Alex,

    There’s a tendency for some to get hysterical over the economy. Last time I checked, nobody here lost a job, or is impacted by the recession in a significant way. If anyone has a counter example, speak up now.

  7. anon Says:

    Excreter, somewhere in the range of 100 companies have laid off thousands of people.

    Revenues for silicon valley companies are down to 1/10th of what they were 3 years ago.

    Nobody is hiring; half these companies are paralyzed in fear.

  8. bob Says:

    RE,
    You rely a bit much on basic headlines. Yes- the DOW is above 9,000. Big whoopty-doo. Read a little beyond the headlines and you’ll see that most profits or improvements were due to companies trimming costs and staff. As seen by the latest data, unemployment is still growing. Anything over 400,000 is pretty bad. Last week it was pushing 600k. Additionally, there’s numerous companies in the BA cutting workers. The latest being the Fremont NUMMI plant, with over 4,500 more job losses. Fremont is the bedroom community of Silicon Valley. Cut prices there and it will affect prices in “prime” SV areas as well. Just watch.

    Bottom line is that yes- the DOW is above 9,000. But we saw this before and I recall you hooting for joy when we saw “green shoots” around February, only to see those numbers dip. The market is currently oversold. There’s zero long-term improvement. You can’t operate an economy with high unemployment. Period.

    I’ll give you an example too: My brother, who graduated top of his class, with 2 years of paid internship experience. He has yet to have one single interview in 4 months. Its not easy out there at all.

  9. mike Says:

    Why argue with a retard?

    Even if you win he’s still a retard?

  10. BobbyS Says:

    SF rents haven’t dropped, at least for studios. It might have something to do with rent control, but I’ll let you economic monkeys decide.

  11. Pralay Says:

    Excreter, somewhere in the range of 100 companies have laid off thousands of people.

    Anon,
    Ignorance is bliss. Reading RealExcreter’s comments it certainly sounds so. :)

  12. Alex Says:

    LOL! Real Excreter, your bullshit is amazing. Either you’re constantly on crack, totally delusional or just plain ol retarded. Maybe all of the above.

    Excreter said:
    There’s a tendency for some to get hysterical over the economy. Last time I checked, nobody here lost a job, or is impacted by the recession in a significant way.

  13. nomadic Says:

    Excreter, somewhere in the range of 100 companies have laid off thousands of people.

    anon, RE has his job. No one else’s job is relevant to his discussion.

  14. anon Says:

    Does he?

    He presents as unhireable online…

  15. Pralay Says:

    Please don’t make fun of a guy who manages mega-project. And he signed a NDS, you know.

  16. BuyersAreIdiots Says:

    There’s a tendency for some to get hysterical over the economy. Last time I checked, nobody here lost a job, or is impacted by the recession in a significant way

    Logical Fallacy. “Hasty Generalization”

  17. Richard Stabile Bergen County Real Estate Says:

    I am amazed, people are leaving homes and you would think they have to rent. I guess families are huddling up with extended families and young people are staying with their parents longer. Would it be we over built even the rental units?


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