As apartments and single family rentals put to bed their third quarters, there are worrisome signs amid the generally good news, according to CNBC’s Diana Olick.
The U.S. apartment vacancy rate fell to its lowest level in more than a decade, according to an industry report released recently. The national apartment vacancy rate fell 0.1 percentage point to 4.2 percent in the third quarter from the second quarter, according to a preliminary report by real estate research firm Reis Inc.
It was the lowest vacancy rate since the third quarter of 2001 when it was 3.9 percent. Some 47 out of 79 markets that Reis tracks posted vacancy decreases.
However, the record vacancy rate failed to pay off for landlords in higher rents. While the average U.S. effective rent in the third quarter grew by 1 percent sequentially, and 3 percent year-over-year, the increase in rent was less than what would have been expected in such a tight market, Reis said.
A weak job market and stagnant wages receive the blame for landlords’ inability to charge higher rents.
“Demand has been so strong to push vacancy rates to such a low level, yet we haven’t seen rent growth of the magnitude we would normally expect,” Reis Senior Economist Ryan Severino said. With such a low vacancy rate, effective rent would have been expected to grow by about 4 percent to 5 percent year-over-year but was stymied by lack of job and income growth, Severino said.
“If median household income is growing at somewhere about 2 percent a year, give or take, once you back out inflation how much money is left for increased spending on rent? Not a lot,” he said.
Net absorption, the number of apartments rented over those that are unoccupied, reached 40,392, the most so far this year and 54 …read more