9.21.14: Update on Apartment Vacancy Rates

Reis reported that the apartment vacancy rate of 4.1% was unchanged in the second quarter of 2014. In the second quarter of 2013 (a year ago) the vacancy rate was 4.3%. And the rate peaked at 8.0% at the end of 2009.

Vacancy was unchanged during the second quarter at 4.1%, a slight worsening from the first quarter. Over the last 12 months the national vacancy rate has declined 20 basis points (bp), slightly below the pace of the last few quarters. We have been anticipating this slowdown in vacancy compression as demand moderates while supply growth accelerates. The national vacancy rate now stands 390 bp below the cyclical peak of 8.0% observed right after the recession concluded in late 2009. However, at 4.1%, the national vacancy rate remains low by historical standards. The only time vacancy in the United States was lower was during the dot.com boom-and‐bust days of 1999 and 2000.

Demand remained relatively strong during the second quarter as the sector absorbed 35,102 units. This is down slightly from last quarter’s 40,853 units absorbed, but was the largest figure for a second quarter since 2011. Year to date, net absorption is tracking ahead of last year’s pace, indicating that demand remains resilient even after more than four years of an apartment market recovery.

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