Apartment vacancy rates that plummeted following the Great Recession appear to have finally bottomed out.
Data published this week by real estate research firm Reis Inc. indicate the national apartment vacancy rate climbed from 4.1 percent to 4.2 percent in the third quarter, the first increase since 2009.
A recent surge in construction helped push up vacancy rates. Builders have completed more than 113,000 new units this year, a pace that exceeds pre-recession totals. At the same time, rental demand has tapered off from 2010-2011 levels.
“With construction anticipated to outpace net absorption over the next four years, we expect the national vacancy rate to slowly drift upward. However, we do not foresee a massive expansion in vacancy rates of the sort that accompanies recessions,” wrote Reis senior economist Ryan Severino.
Activity for the construction sector picked up in recent months. The industry's unemployment rate, while above-average nationally, declined from 7.7 to 7 percent in September, according to Labor Department data.
Apartment markets are seeing vacancy rates climb as a result of new construction. Severino notes that it’s typically smaller metros that have the tightest markets. Larger markets are now generally experiencing upswings in vacancy rates.
Reis identified the New Haven, Conn., metro area as the tightest apartment market in the country, registering a vacancy rate of just 2.1 percent. Memphis recorded the highest vacancy rate for the quarter at 8.5 percent.
Of 79 housing markets, the following experienced the largest vacancy-rate increases over the previous 12 months:
|Area||12-Month Vacancy Percentage-Point Change||2014 Q3 Vacancy Rate|
|District of Columbia||1.6%||6.4%|
|Northern New Jersey||0.6%||4.2%|
Source: Reis, Inc.
NOTE: Reis does not release data for all metro areas. In terms of asking rent prices, all 79 markets recorded increases over the past 12 months. Rents in San Francisco jumped 5.8 percent – the largest increase nationally, followed by Seattle and San Jose.