Posted by BarryGraubart in First Glance Reports – Reis Reports
Nationally, the apartment market continues to thrive. Despite market jitters and disappointing economic news, apartment vacancies in Q2 have dropped to 4.7% nationally, a level last seen in 2001, a market with a strong economy and unemployment at just 5%.
Those numbers come from the just-published Reis First Glance Reports. Full second quarter data will be published on the site beginning August 1.
The second quarter saw a 20 bp drop in vacancy rates, lower than the 30-40 bp declines we’ve seen the past ten quarters. This moderation in vacancy compression is not unexpected with such tight markets, as landlords begin to shift their strategies for revenue growth from vacancy decline to accelerating rent increases.
Against that backdrop, effective rents increased 1.3% for the quarter, nationally, the fastest pace recorded by Reis since the third quarter of 2007. The rent increase was broad-based, as all 82 primary markets surveyed by Reis showed gains for the period.
The tightening market was aided by low inventory growth with just 10,000 units coming online nationally during the quarter. With developers looking to take advantage of current conditions, Reis expects a total of 75,000 units to come online in 2012, with 150,000 – 200,000 forecast for 2013.
I would like to highlight their forecast of 100% increase in MF units coming online in 2013 from 2012.
From the graph, REIS is now predicting that the multifamily housing completions will increase to levels seen in 1988 and 1999 - both recessionary periods. I don't feel good about the trends. Multifamily projects typically have a lot of units in multi-story buildings. Most MF projects are financed in total and the project is started in total. The completion of the project may take a year while a SF can be built in 120 days. Thus, in my opinion, by the time these projects are completed in 2013, the rental market vacancy rates will increase.
Compare the above graph with the single family starts graph
In my opinion, multifamily housing will compete with single family housing in 2013 for the pent-up demand. Single family housing will win just because it will cost less per month to buy a house than rent an apartment. Again, I predict a sharp increase in SF new home prices. Do you know that lumber has increased 18% over last year? Housing inflation and appreciation is starting now.
Tell your family members, friends, co-workers, and strangers to buy now. The most significant problem is that interest rates were always used to slow down inflation and encourage growth. With interest rates at historic lows, buy now! Raising interest rates will ............................................???????
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