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Bloomberg
U.S. apartment vacancies climbed in the first quarter as a flood of newly built units hit the market, slowing the rate of rent increases.
Effective rents, or what tenants pay after landlord concessions, rose 4.5 percent in the first quarter from a year earlier, down from 5 percent growth at the end of 2015, Reis Inc. said. The vacancy rate climbed to 4.5 percent from 4.4 percent in the previous quarter and a low of 4.2 percent a year earlier, according to the real estate research firm.
Developers may finally be getting ahead of themselves after rushing to meet rental demand, which soared after the housing crash ended homeownership for millions of people and led to tighter mortgage standards. Builders completed 200,142 units over the past 12 months, the highest total for a one-year period since 1988, Reis said. “When you have more supply and demand pulling back, you’re going to have things reverse course,†Ryan Severino, senior economist at New York-based Reis, said in a phone interview.
Apartment occupancy in the 100 largest U.S. metropolitan areas rose by just 20,077 units in the first quarter, MPF Research, the rental-research division of RealPage Inc., said in a report last week.
That’s less than half the typical first-quarter demand for 40,000 to 50,000 apartments in the past few years, and was short of the 65,258 new units completed in the period, MPF said.
“Uncertainty about the nation’s near-term economic outlook appears to be constraining new household formation,†MPF Chief Economist Greg Willett said. Rental demand is lower than “typically seen when job production is fairly solid. There’s surprisingly little mobility, with many households hunkered down in their current living arrangements.â€
Despite higher vacancies, rents continue to rise. In the first quarter, new-resident rents climbed 5 percent from a year earlier to $1,260 a month, MPF said. Rents grew 11.8 percent in Portland, Oregon, the highest annual growth rate among the 100 metro areas tracked by MPF, followed by Sacramento and Oakland, California, and Seattle.