The national vacancy rate fell to 7.2 percent from 7.9 percent a year earlier and 7.8 percent in the second quarter, the New York-based research firm said. It was the lowest rate since 2008’s fourth quarter, when it was 6.7 percent, and the first year-over-year drop since 2007’s fourth quarter. Vacancies reached a three-decade high of 8 percent late last year.
Rental demand usually goes up during the second and third quarters, when people tend to lease apartments, said Victor Calanog, director of research at Reis. The U.S. recession interrupted that pattern starting two years ago as widespreadjob cuts prompted many people to move in with parents or friends instead of renting their own apartments.
“Those guys are starting to move back to the rental market,” Calanog said in a telephone interview. “What we’re seeing might be these folks who realized, ‘Hey, I love my father and mother, but I don’t think I can live with them forever. I’ll take a chance on a yearlong lease and maybe I can find a job in six to nine months.’”
The change in occupied space, known as net absorption, rose by 84,382 units, a record since Reis began keeping the data in 1999, the company said. Net absorption totaled 157,788 apartments from January through September, compared with almost 21,000 units vacated a year earlier.
Signing of apartment leases has risen as a surge in home foreclosures forced many people to rent and landlords offered concessions amid a weak economy. Job growth will determine whether the apartment market continues to improve, Calanog said.
“If the pace of job growth is really lackluster, then I wouldn’t be shocked if vacancies suddenly rose in the fourth quarter,” Calanog.
About 90 percent of the rise in net absorption came from leasing up existing apartments, Reis said. New properties came to market almost half empty, and the total supply of new stock was the smallest since 2007’s second quarter. The 21,906 new units that came to market in the third quarter had an average vacancy rate of 60 percent, said Reis.
Landlords’ asking rents climbed to $1,037, little changed from $1,033 a year earlier and $1,032 in the second quarter, according to Reis. Actual rents paid by tenants, known as effective rents, rose to an average $980 from $971 a year earlier and $974 in the second quarter
New Haven, Connecticut, had the lowest vacancy rate in the third quarter, at 2.3 percent, followed by New York City; Long Island, New York; San Jose; and Central New Jersey, according to Reis. New Haven is home to Yale University.
The Reis survey measures about 9.1 million apartments.
To contact the editor responsible for this story: Kara Wetzel at email@example.com
- In Rental Market, Landlords Gain Upper Hand (blogs.wsj.com)
- US apartment vacancy rate drops sharply in 3rd qtr (reuters.com)
- Apartment Market Strengthens, As Larger Housing Woes Mount (huffingtonpost.com)
- U.S. office market may have hit a bottom – Reis (reuters.com)
- You: Landlords Back in Control (nytimes.com)
- What’s Going on With the Rental Market? You Tell Us (observer.com)
A new survey shows that Americans are generally taking a dimmer view of homeownership, even as a rising number say they believe it’s a good time to buy a home.
The survey from Fannie Mae reveals lots of interesting insights like this one: homeowners who are underwater, or owe more than their homes are worth, are more likely to view housing as a safe investment than renters. Almost three out of four mortgage borrowers, and nearly seven in ten underwater homeowners, say that housing is safe, compared to just 57% of delinquent borrowers and 54% of renters.
Overall, the number of Americans who say that homeownership is a safe investment has declined—to 67% in July, from 70% in January and 83% in 2003.
While more people believe that it’s a good time to buy and a bad time to sell, the number of Americans who say they’re likely to rent, rather than buy, their next house has increased slightly since January, to one third of those surveyed. (Columnist Brett Arends offers his list of 10 reasons to buy.) Respondents also expect rents to grow much faster than home prices over the next year.
The report shows some worrying trends for banks and mortgage investors. While three-quarters of borrowers consider their mortgage payment to be their most important debt obligation (that hasn’t changed since January), the number of delinquent borrowers that count their mortgage payment as their most important has fallen, to 50% in July from 57% in January.
The vast majority of Americans still disapprove of borrowers stopping their mortgage payments. But the number who say it’s acceptable to default if a borrower is underwater has increased slightly, to 10% from 8% in January.
A few other findings from Fannie’s survey (view the full results, in pdf):
- Nearly half of all borrowers, and more than half of underwater borrowers, think their lender is likely to pursue other assets in addition to their homes if they were to stop paying their mortgage. [The ability of the lender to do this actually varies from state to state.]
- Underwater and delinquent borrowers are also slightly more optimistic about the amount of time it will take for their credit scores to recover after a mortgage default. Around one in five of those borrowers say that it would take one to three years to wipe a mortgage default from their credit report, compared to one in seven for the general population.
- A majority of Americans also believe that borrowers are more at fault than mortgage companies for having unaffordable loans. Nearly 56% of borrowers—and 60% of underwater borrowers—say that borrowers, not banks, have greater culpability for being in over their heads with respect to affordability.
A separate survey from the Pew Research Center found that 19% of those polled said it was acceptable to walk away from a mortgage, while 59% said it was unacceptable and 17% said it depended on the situation.
Democrats were twice as likely to say that it was acceptable to walk away from a mortgage (23%) than Republicans (11%), according to the Pew report.
Follow Nick on Twitter for more housing and mortgage news: @NickTimiraos