New York City—The percentage of vacant apartments increased nationwide to an average 6 percent in the second quarter. That’s up from 4.7 percent last year, and it’s the highest vacancies have been since 2004, according to market research firm M/PF YieldStar.
Market experts blame rising vacancies on the slow economy, job losses, and overbuilding of new apartments relative to weak demand. The crisis in foreclosures and the resulting implosion of the financial markets created this faltering economy. However, not all of the effects of the foreclosure on the apartment business have been bad.
Ex-homeowners evicted after foreclosures make up 2 percent to 6 percent of apartment applicants, according to “Renter Credit Quality in a Volatile Housing Market,” a new paper by Bruce Innes of Innes Works Consulting, released by the National Multi Housing Council (NMHC).
Overall, however, the credit quality of new rental applicants remains high. According to the paper, a relatively low 5.4 percent of rental applicants had a record of being 90 days or more past due on their home loan or in default on their mortgage.
“The primary effect the housing downturn is having on the apartment sector is a dramatic slowdown in the number of renters leaving to become owners,” said NMHC President Doug Bibby. “This, in turn, is raising the credit quality of rental applicants and helping insulate the apartment sector from the financial woes the single-family sector is currently experiencing.”
NMHC has also created a brochure called “Renting Smart: Rent from Pros” to help professional property managers compete with homes and condominiums put out to rent by amateur investors. Nearly 40 percent of today’s foreclosures involve a single-family house, condominium, or other housing rented out by its owner, according to the brochure. People who choose to rent these properties put themselves at risk for losing their lease, losing their security deposit, and having to move on short notice.