Wednesday, June 12, 2013

Vacancies in single-family homes and townhouses drop to near zero

Continuing an ongoing trend, the 1st quarter 2013 vacancy rate in rented single-family homes, townhouses, and condos in the metro area fell year over year for the fourth quarter in a row and dropped to a cumulative vacancy rate of 0.9 percent. The vacancy rate was 1.6 percent during the first quarter of 2012. This is the lowest vacancy rate ever recorded by the survey which dates back to 2003. The first graph shows the vacancy rate for all units surveyed in the metro area and for select property types.  Clearly, the overall trend has been downward since 2010, and the market has been very tight since 2010. Traditionally, these types of properties tend to have lower vacancy rates than multifamily apartment units. As apartment vacancies have continued to tighten (to 4%-5%) since 2009, we see condos, townhomes, and single-family homes tighten all the more. The vacancy rate for all units was 1.7 percent during the 4th quarter of 2012. 

Meanwhile, increases in the average rent have begun to accelerate a little following numerous quarters of rather tepid growth. The average rent in all units surveyed for the metro area was 3.0 percent, rising from $1,056 during the first quarter of 2012 to $1,089 to the first quarter of 2013. Not surprisingly, single-family houses reported the highest average rent of $1,324, while condos reported the lowest average rent of $805 during the first quarter. 

The third graph shows the year-over-year change in each type of unit. We can see that condos now appear to be establishing an upward trend after numerous quarters of year over year declines in the average rent. during the first quarter 2013, the condo average rents were up 6.9 percent, year over year, while townhouses were up 4.4 percent and single-family houses were up 4.8 percent. 

These sizable increases suggest a change from recent quarters in which year over year increases were far more mild with changes ranging typically from 1 to 3 percent in both single-family houses and condos in recent quarters. 

The last graph shows the average rent adjusted for inflation. While increases in rent have become the norm in recent years, we find that these increases are just about keeping up with inflation. In other words, the real average rent has been flat in recent years. However, if the current trend keeps up, we will start to see the average rent surpass inflation and show real gains. Using constant 2001 dollars, the average rent during the first quarter was $843, compared to $831 reported during the first quarter of 2012. That's an increase of 1.4 percent. So, we have seen a real increase over the past year, but it was an increase of 12 dollars.