Apartment prices fall 3%, vacancies up 8%

Apartment prices fall 3%, vacancies up 8%The national apartment vacancy rate rose to 8% in the last three months of 2009, according to Reis Inc., a commercial real estate information provider. That is the highest level Reis has ever reported. The vacancy rate barely inched up from the third quarter -- just 7.9% to 8% -- but it rose significantly from a year ago, when it stood at 6.7%. Even more dramatic, vacancies spiked 45% from the third quarter of 2006, when they had bottomed out at 5.5%. According to Reis economist Ryan Severino the main culprit is the recession. Not only do people lose their jobs during downturns, many others are afraid of being laid off. And they all feel pressure to reduce their housing costs. "Household formation rates slow down during recessions," said Severino. "They may move in with their families or rent larger apartments and partner up with friends. They partner with others much more then they do during more prosperous times." Occupancy rates did climb during the quarter, with nearly 10,000 more apartments being rented than had been three months earlier, according to the report. But vacancy rates still managed to climb because 28,000 newly constructed units hit the market. A total of 120,000 new apartments came online during 2009, the most since 2003.