Reports for the fourth quarter of 2009 were not so reassuring for landlords and investors in apartment buildings. The amount of vacancies was reported to reach a 30 year high at 8%. This amount of open apartments is causing landlords to slash previous rent prices by 3%. Major cities like San Jose, Seattle, Washington and San Francisco were showing rent amounts on the rise until the recession hit. Now these cities have to implement incentives not only to keep their current renters, but entice new ones. Even New York City has been hit by this recent phenomenon. It is being estimated that 60% of NY Cities’ rental buildings have had to lower their rents to meet this challenge. Additional efforts to retain current renters have included shampooing their carpets, painting accent walls and even throwing in gift cards.
Of the 79 markets that are currently measured 52 showed increases, 17 showed a slight increase while 10 remained the same as the prior year. There are several reasons that are contributing to downfall of the rental market. Many experts agree that the high unemployment rate and the housing market crash are the two main contributors. Younger renters are being forced to move back home because they are not able to find gainful employment. Others that have recently lost their homes due to foreclosure are finding that their credit is destroyed and that they are now having to live with friends or family because they cannot qualify to rent an apartment.
2009 saw an additional 120,000 rental units become available and these new apartments only added to the competition in the rental market. There is some good news coming in 2010 with regards to new apartment building. The credit crunch has essentially frozen new developments. Market analysts estimated that only half the amount of 2009’s numbers would make their way to completion in 2010.
This year is not expected to be any brighter. Early predictions expect to see another 2 to 3 percent drop in rentals across the board. Additional factors that may come into play are the amount of potential buyers that are going to be making a move into homes that are at market low prices and add this to the expiration of the federal tax credit this April and landlords may need to request federal bailout funds as well.
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