What this shows is apartment owners are willing to drop rents before they offer any incentives. And the future holds little hope for a reversal. Reis is forecasting rent declines of as much as 2% for the year and a vacancy rate that tops out at about 8%, the highest level since the late 1980s.
Once thought to be immune from the recession, apartment and multifamily vacancies are pushing more owners into delinquency. Looking at CMBS default and delinquency rates, the multifamily sector posted the highest delinquency rate in February, reaching 3.3% from 3% in January, according to Standard & Poor's.
$3.2 billion in multifamily debt was delinquent in Q1 2009, up from about $1.5 billion in the Q3 2008. The delinquency rate on multifamily loans held or insured by Fannie Mae rose 88% in the fourth quarter to 0.3%.
Since Q3 2006, apartment vacancies have trended up. Thoughts are, over capacity, due in part from failed condo projects converted to rentals, and the supply of foreclosed homes competing for renters. Adding fuel to the fire, a deteriorating job market that has accelerated the pace of vacancies and is putting downward pressure on gross potential rents.
Markets that are most impacted seem to be those markets that had a serious housing problem to begin with. Rents fell at least 1.5% across all Southern California markets, and 1.3% in Fort Lauderdale, Fla. Most Southern and Midwestern markets also fared poorly.
However all is not lost. There were signs of improving or stabilizing in markets that were among the first to enter the downturn. Some markets in Florida, St. Petersburg and Miami for example, have seen rent increases by .07% and .04% respectfully.
