Apartment vacancy rates are plunging, thanks to a jump in employment and the continually growing number of foreclosures. Despite the increasing affordability of homes, ownership is at its lowest level in over a decade, making the rental market ripe for growth and moderate rent increases likely. See the following article from Property Wire for more on this.
Soaring foreclosures in the US is boosting the rental property market at with demand for apartments also increasing due to an improving employment prospects for young people.
The number of occupied apartments increased by 215,000 in the 64 largest US markets in the first half of the year, according to MPF Research. That’s almost double the units added in all of 2009 and the most since the firm began tracking the data in 1992. The vacancy rate declined to 6.6% last month from 8.2 % in December.
‘Demand is pretty stunningly strong in the first half,’ said Greg Willett, a vice president at Texas based apartment industry research firm.
The US economy’s recovery from the worst recession since the 1930s has revived hiring enough to stimulate demand for apartments. The growth hasn’t been enough to prevent more home foreclosures, which lift rental demand, or to lead to a sustained rebound in home buying.
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New jobs are the biggest driver of apartment occupancy. Employers began hiring again in January, adding an average of 147,000 jobs a month through June, according to the Labor Department. Employment for people aged 20 to 29 years old, a key group for landlords, rose in May and June on a year on year basis for the first time since the end of 2007.
While payroll growth has been modest compared with pre-recession levels, it may be enough to have persuaded some families sharing housing with relatives to get their own places, according to Mark Zandi, chief economist of Moody’s Analytics.
Finances for homeowners didn’t improve fast enough to prevent more than 1.65 million foreclosure filings in the first half, an increase of 8% from the same period in 2009, according to the latest figures from RealtyTrac. A record 269,962 US homes were seized from delinquent owners in the second quarter as lenders set a pace to claim more than 1 million properties by the end of 2010.
The US homeownership rate fell to 66.9% in the second quarter, the lowest since 1999, figures from the US Census Bureau show.
As homeownership continues to decline, people need to live somewhere, according to Henry Cisneros, executive chairman of CityView, a real estate investment firm in Los Angeles that focuses on urban projects including apartments. ‘The rental market will be robust for the next few years,’ he said.
Effective rents, or what tenants pay after concessions or breaks from landlords, increased 1.4% in the biggest markets in the first half, the MPF Research also shows. Rents may rise 4 to 6% in both 2011 and 2012, compared with a gain of about 2% this year, Willett said.
Landlords won’t be able to raise rents too aggressively because unemployment remains high at 9.5% but declines in home prices have made it no more expensive to buy than rent in about half of larger markets around the nation, Willett added.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.