Vacancy Rates Rise To 8% As Homeowners Move To Leasing

It is a paradox and one that is bad for both the residential and housing real estate markets. Reis, an industry analyst group, says that the vacancy rate in the apartment sector rose 8%, the most in fifty years. Looking at the data, The Wall Street Journal reports that rents dropped 3% for the same period.

The declining cost of renting a residence is occurring at the same time that people are leaving their homes due to foreclosures or abandoning them because they are underwater due to falling prices.

The migration of people to rental properties should firm rate, but that obviously does not happen. That means that there is an oversupply of apartments and homes for rent. This could be caused, in part, by the number of vacant homes on the leasing market. Almost all of them were owned by someone just a year ago.

The falling rents and increase in vacancies are good for consumers but bad for banks and commercial real estate operators. Apartment building with large mortgages cannot handle empty apartments and low yields on those that are occupied. Banks who made loans for the construction or purchase of these apartment building cannot afford to write those mortgages off.

The real estate industry’s problems get more complex each day, but they do not get any better.

Douglas A. McIntyre