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MarketScreener Homepage  >  Equities  >  Nyse  >  Equity Residential    EQR

EQUITY RESIDENTIAL

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U.S. apartment vacancy rate falls, rents rise

10/01/2013 | 12:10am EST

NEW YORK (Reuters) - Finding an apartment to rent got even harder in the third quarter, as the U.S. apartment vacancy rate fell to its lowest level in more than a decade, according to an industry report released on Tuesday.

The national apartment vacancy rate fell 0.1 percentage point to 4.2 percent in the third quarter from the second quarter, according to a preliminary report by real estate research firm Reis Inc.

It was the lowest vacancy rate since the third quarter of 2001 when it was 3.9 percent. Some 47 out of 79 markets that Reis tracks posted vacancy decreases.

Despite the decline in the vacancy rate, a weak job market and stagnant wages have prevented a commensurate rise in rents, Reis said.

While the average U.S. effective rent in the third quarter grew by 1 percent sequentially, and 3 percent year-over-year, the increase in rent was less than what would have been expected in such a tight market, Reis said.

Effective rent is the rent landlords receive after months of free rent and other perks.

"Demand has been so strong to push vacancy rates to such a low level, yet we haven't seen rent growth of the magnitude we would normally expect," Reis Senior Economist Ryan Severino said.

With such a low vacancy rate, effective rent would have been expected to grow by about 4 percent to 5 percent year-over-year but was stymied by lack of job and income growth, Severino said.

"If median household income is growing at somewhere about 2 percent a year, give or take, once you back out inflation how much money is left for increased spending on rent? Not a lot," he said.

Net absorption, the number of apartments rented over those that are unoccupied, reached 40,392, the most so far this year and 54 percent higher than a year earlier.

New construction that is expected to come on line next year may fuel a rise in the vacancy rate and could slow the increase in rental rates, Severino said.

Over the past five years, the apartment sector has been the beneficiary of the U.S. housing bust, the economic recovery, high mortgage requirements, and a constrained supply of new apartments.

Those factors have pushed down the vacancy rate and allowed apartment owners, such as Equity Residential (>> Equity Residential), Essex Property Trust Inc (>> Essex Property Trust Inc) and AvalonBay Communities Inc (>> AvalonBay Communities Inc) to raise rents.

Rising mortgage rates in the third quarter also dampened homeownership, forcing people to rent longer.

The 4.2 percent average vacancy rate in the third quarter was down from 4.3 percent in the prior quarter and from 8 percent in late 2009.

At 2 percent, New Haven, Connecticut had the lowest vacancy. Memphis, Tennessee had the highest vacancy rate, at 8.2 percent.

The average asking rent rose 0.9 percent in the third quarter to $1,121.16 per month. The average effective rent was $1,073.29.

San Francisco and San Jose, U.S. capitals of the technology industry, saw the highest effective rent increase, both up 2.2 percent to $2,043.02 per month for San Francisco and $1,685.72 for San Jose.

New York remained the most expensive place to rent in the United States with an average effective rent of $3,049.37 per month, up 0.9 percent. The cheapest was Wichita, Kansas, at $528.95 per month, up 0.8 percent.

(Reporting by Ilaina Jonas)

By Ilaina Jonas


© Reuters 2013
Stocks mentioned in the article
ChangeLast1st jan.
AVALONBAY COMMUNITIES, INC. 0.72% 177.02 Delayed Quote.10.34%
EQUITY RESIDENTIAL 2.05% 66.75 Delayed Quote.12.60%
ESSEX PROPERTY TRUST, INC. 2.03% 259.97 Delayed Quote.9.50%
RISE, INC. -3.33% 29 End-of-day quote.20.83%
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Financials (USD)
Sales 2021 2 383 M - -
Net income 2021 336 M - -
Net Debt 2021 8 044 M - -
P/E ratio 2021 61,1x
Yield 2021 3,64%
Capitalization 24 875 M 24 875 M -
EV / Sales 2021 13,8x
EV / Sales 2022 13,4x
Nbr of Employees 2 600
Free-Float 98,1%
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Mean consensus HOLD
Number of Analysts 22
Average target price 65,33 $
Last Close Price 66,75 $
Spread / Highest target 15,4%
Spread / Average Target -2,12%
Spread / Lowest Target -19,1%
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Managers and Directors
NameTitle
Mark J. Parrell President, Chief Executive Officer & Trustee
Robert A. Garechana Chief Financial Officer, Treasurer & Executive VP
Samuel Zell Chairman
Michael L. Manelis Chief Operating Officer & Executive VP
Alan W. George Executive Vice President-Investments
Sector and Competitors
1st jan.Capitalization (M$)
EQUITY RESIDENTIAL12.60%24 376
AVALONBAY COMMUNITIES, INC.10.34%24 473
ESSEX PROPERTY TRUST, INC.9.50%16 560
INVITATION HOMES INC.-1.28%16 529
SUN COMMUNITIES, INC.-1.23%16 352
MID-AMERICA APARTMENT COMMUNITY, INC.6.35%15 412