NEW YORK, NY - Job losses took a heavy toll on the nation's landlords last quarter, as rents fell across the country and vacancies jumped higher. New York City took the biggest hit, according to numbers to be released Wednesday by research firm Reis Inc. Rent growth declined by 1.9 percent in New York, even though the city still has the nation's tightest rental market, with vacancies at just 2.3 percent.
New York landlords have enjoyed big rent increases over the past few years, but that's unlikely to continue in 2009. In the fourth quarter, three-quarters of multifamily buildings in the city exhibited negative rent growth, a big uptick from the past three quarters, when just 37 percent of properties saw negative rent growth, according to Victor Calanog, director of research at Reis.
The Big Apple stands out among the cities that saw the biggest rent drops because it hasn't been inundated by a glut of foreclosed homes or condos that have been converted to rentals. That "shadow supply" helps explain, in part, the 1.8 percent drop in rental growth in Miami or the 1.6 percent decline in Ventura County, Calif. Altogether, 56 of the 79 markets tracked by Reis had negative rental growth last quarter.
Vacancies jumped sharply across the southeast, including Charleston, S.C., where the vacancy rate increased to 11 percent from 9 percent, and Birmingham, Ala., where vacancies reached 9 percent, up from 7.4 percent in the third quarter.
Cities in Texas and Oklahoma, which had been buoyed throughout the summer and fall by a booming energy sector, have seen the strongest rental growth. In Houston, rents increased by 1.4 percent last quarter, to $715, while Tulsa, Okla., enjoyed rent growth of 0.9 percent. But as oil prices have collapsed, it's unclear how long those gains may stay, says Mr. Canalog. "The jury is still out as to whether Houston will truly buck the trend," he says.
Apartment owners are buoyed by the fact that, unlike during the last recession, when many renters took advantage of easy financing to move into homes, lending standards today are much tighter, which will keep some renters from taking advantage of record low mortgage rates and falling home prices. One-in-five renters moved out to buy homes during the previous recession compared to 7 percent today, says Richard Campo, chief executive of Camden Property Trust, a Houston-based real-estate investment trust.
"We had people moving out who had trouble making a $1,000 rental payment who were buying a quarter-million dollar home" five years ago, says Mr. Campo. "You'll have people move out to buy houses but it won't be like it was, in droves."
Source: WSJ.com