Reis Inc.: Apartment vacancy rates rising
"'Our expectation is the national vacancy rate will rise modestly through the end of 2007,'' Reis Chief Economist Sam Chandan said in a telephone interview. 'We're starting to see a larger number of completions coming on line.'
"The supply of available apartments is expanding at a pace that will accelerate as warmer weather causes construction to pick up. In some markets, demand for rentals is growing so quickly that developers are converting to rentals buildings they had hoped to sell as condominiums, Chandan said.
This development comes as no surprise to me. Construction of traditional apartments has started to pick up. But more importantly, hundreds of thousands of single-family homes, town houses and condos that were snapped up by speculators hoping to flip them aren't moving. They're sitting empty. That "shadow" supply is flooding the rental market, providing real competition to apartment complex owners. Therefore, rental supply is rising, overall vacancies in the traditional apartment sector are climbing, and rent growth is poised to slow.
See this early March post for more details.