Apartment vacancies hit their highest point since 1986, surging in cities from Raleigh, N.C., to Tacoma, Wash., reports the Wall Street Journal. The U.S. vacancy rate reached 7.8 percent, 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.
In New York City, however, the vacancy rate fell to 2.9 percent in the third quarter from 3 percent in the second as the end of summer brought an influx of tenants signing leases, according to Reis Inc. in a Bloomberg story.
Effective rents dropped 0.9 percent from the prior quarter and were down 6.8 percent from a year earlier.
“With New York being relatively more dependent on the still-embattled financial services sector, it may take a few more quarters before we see rents bottoming out” there, Reis said in a statement. “We are on track for 2009 to register as the worst year in rent drops on record, far exceeding the historic 3.8 percent decline recorded in 2002.”
The Big Apple’s drop was second only to that of San Jose, which fell by 8 percent.
In New York, Jennifer Hyman rented a one-bedroom apartment in July at a monthly rate of $1,950 – down from $2,450 for the previous tenant – when she returned to the city after graduating from Harvard Business School. Her first month’s rent was free – and her landlord painted the apartment, scrubbed the floors and added window coverings.
“The experience was night-and-day different from before,” said Ms. Hyman, who had rented other Manhattan apartments between 2002 and 2007, each time paying a brokers’ fee and feeling pressured to sign a lease the minute she found an apartment. Now, she says, “Renters are the ones with the power.”
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The rate nationally 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, the Journal reported. Reis projects that the vacancy rate will peak at well above 8% in mid-2010.
Driving the changes is the troubled employment market, which is closely tied to rentals. With unemployment at 9.8% – a 26-year high – more would-be renters are doubling up or moving in with family and friends during periods of job loss. Landlords have been particularly battered because unemployment has been higher among workers under 35 years old, who are more likely to rent.
During the third quarter, vacancies increased in 42 markets, improved in 26 markets and remained unchanged in 11 markets. Omaha, Neb., saw the largest rise in vacancies, with the rate rising 1.1 percentage points to 7.4%. Other big rises were seen in Memphis, Tenn., Indianapolis, Raleigh and Tacoma.
Nationally, effective rents have fallen by 2.7% over the past year, to around $972. (Effective rents are those that include landlord concessions.)
The cities with the biggest declines in rents in the previous 12 months were:
- San Jose, Calif.: 8 percent
- New York: 6.8 percent
- Orange County, Calif.: 5.5 percent
- Ventura County, Calif.: 5.1 percent
- Los Angeles: 4.6 percent
- Miami: 4.6 percent
- Las Vegas: 4.6 percent
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