In keeping with the tradition of reporting data that is “less bad” than it was a year ago instead of “much worse”, real estate research firm Reis said that US apartment vacancies stopped rising. They were 8% in the first quarter of 2010. That was the same as in the last quarter of 2009. Both numbers are the highest level since 1986.
Rents rose .3% from the fourth quarter to an average of $967.
Victor Calanog, Reis director of research, told Reuters “If the second and third quarter are typically stronger, and we recorded particular strength in the first quarter, it certainly looks like we turned the corner this time around, one quarter sooner than I expected.” But, that is a forecast and time will tell. With net effective unemployment and underemployment in the US close to 17%, the markets for rentals and housing in general are not likely to rebound much anytime soon.
The underlying problem with rental income for landlords is that many residential buildings were bought at the peak of the real estate boom between 2003 to 2006 and still have hefty mortgages. The mortgages on these buildings are still high, but the value of the property that supports them has usually dropped sharply. That means the buildings are unlikely to be sold.
At the same time, poor occupancy levels and low rents mean that residential real estate owners are likely to be bringing in less that they projected in rent revenue. That, in turn, makes it more difficult to cover their mortgage payments.
The owners of residential real estate properties still have a major problem, and so do the banks that hold their mortgages.
Douglas A. McIntyre
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