July 8, 2009: US Apartment Vacancy Rate at Record 22 Year High in Second Quarter 2009

The second quarter of any year is generally considered peak leasing season in the US, but reports show that during the second quarter of 2009, the apartment vacancy rate rose to a 22-year high because of rising unemployment that decreased apartment rental demand. Rents plunged fastest in markets such as New York and San Jose, California, where many white collar jobs have been lost. Additionally, markets such as Las Vegas and Orange County, California, that have transformed foreclosed homes and condominiums into rental property also suffered a decrease in vacancies. Nationally, vacancy levels rose from 6.1 percent in 2008 to 7.5 percent in the April to June 2009 period. Victor Calanog, Reis’s director of research, says: “Everyone expected spring leasing to save apartment landlords. That hasn’t happened.” Initially, the housing catastrophe offered property owners a chance to entice distressed homeowners into the leasing market, but job losses occurred at such a rapid pace that any increases that apartment leasing might have garnered from the housing crisis were destroyed. The rise in apartment vacancies began at the end of 2007, further quickening with the worsening of the economy in fall 2008. Meantime, rents have continued to fall at the swiftest pace in more than a decade and effective rents—concessions by landlords such as a month’s free rent—fell 1.1 percent in first quarter 2009 and 0.9 percent in the second quarter, and averaged $975 per month. At 5.8 percent, New York City marked the largest 12-month rent decrease with an average of $2,680 per month. Statistics are based on a survey by Reis Inc., a New York real estate research firm, which tracked 79 markets, of which 45 showed vacancy increases. [Wall Street Journal, 7/8/2009]