US Rental Vacancy Rate Highest in 23 Years
The vacancy rate for apartments and other rental units is the highest it has been since 1986. That is worrisome news as lease rates are dropping, significantly in some cities, and that means a lower expectation for housing costs. And that is not good news for home sellers.
The $8,000 new home buyer tax credit is expiring very soon. In all reality, those who would have used the tax credit probably have already done so, so the bump in homebuyers if the credit is extended will be minor to the chagrin of many real estate agents. So relief is not around the corner for sellers of lower valued properties.
The U.S. vacancy rate reached 7.8%, a 23-year high, according to Reis Inc., a New York real-estate research firm that tracks vacancies and rents in the top 79 U.S. markets. The rate is expected to climb further in the fall and winter, when rental demand is weaker, pushing vacancies to the highest levels since Reis began its count in 1980.
Meanwhile, the air leaving the market is driving rents down, most sharply in markets that had been chugging along until a year ago, when unemployment accelerated, including Tacoma; San Jose, Calif.; and Orange County, Calif. via WSJ
Add to the situation that rents are dropping to compete for demand, property prices for homes may see another downturn as demand shrinks and rental value is diminished. We sometimes forget that people are not stupid. If I can rent a home for $1,000 a month and keep my capital fluid instead of buying and paying in mortgage, taxes, and upkeep $1,200 a month, odds are I will pass on the joy of home ownership for the near term.
While I am not predicting another severe downturn, until rents stabilize and start rising, the motivation for renters to become buyers is not going to be a driving force in the real estate market.
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Comment by Gainesville Real Estate on 11 October 2009:
I have a feeling congress is going to keep this tax credit thing going.
What I find disturbing is that to offset the drops in assessed values of residential housing, many communities are RAISING assessed taxable values for commercial properties to offset the difference – even though commercial properties have fallen in value just as much.
Comment by Augusta GA Homes on 11 October 2009:
As the rental prices drop to remain competitive, the market will have to also adjust to compete. Although this is not good for current homeowners, it is great news for buyers. They can get a lot more house for a lot less.
So, if people can see past the fear and see the opportunity that awaits them, they will be very happy several years from now when the market corrects and they have substantial equity in their property.
Comment by Portland Real Estate on 12 October 2009:
Nice to hear, maybe its time I hit up my rental agency for a reduction in rent. That would certainly help me save to buy a house.
-Tyler
Comment by Natalie Pilkinton on 13 October 2009:
I find it to be a great opportuniyt to get out there and buy now. This market is prime for the picking. The housing stimuls has been a big “fake boost” to the housing markets. False positives. The housing market will adjust if the governments stays out of the lending, stuimulating and controling, now even apprasials. NOW is the time to buy investment properties!
Comment by Trent Yeo on 16 October 2009:
If the first time buyer tax credit does end soon we most likely will see rental occupancies head back up or at least level off at first. Less people buying = more people renting. With that said, I’m under contract on a 202 unit which is currently 97.5% occupied…
Comment by Harold Scott on 15 November 2009:
I had a rental unit that I had to drop the price on to sell recently. Normally I have been able to rent it within a couple of weeks. However, this time it took about 3 months. In our market over the last several months the absorption rate of single family homes was down to about 3 1/2 months supply. The lower end of the market was healthy and brisk. With the $8000 tax credit in place and many bargain properties contributing to this increase in demand. Therefore, as a matter of economic, I think at times there can be an inverse relationship between sales and rentals.