The housing market in the United States has been experiencing a strong seller’s market for the past several years. However, recent data shows that there has been a shift in the market, as apartment vacancies have risen for the first time in six years.
According to a report by RealPage, a property management software and data analytics firm, the national apartment vacancy rate rose to 5.5% in the fourth quarter of 2022. This marks a 0.6% increase from the same period in the previous year, and the first year-over-year increase in vacancy rates since 2016.
The rise in vacancy rates can be attributed to a number of factors, including an increase in new construction, a rise in rental prices, and changes in the way people work and live.
One of the main drivers of the increase in vacancies is the significant increase in new apartment construction in recent years. According to the National Multifamily Housing Council, over 400,000 new apartments were completed in 2021 alone. This influx of new supply has increased competition among landlords and forced some to lower their rents and offer more incentives to attract tenants.
Additionally, rental prices have been rising rapidly in many parts of the country, which has caused some renters to seek out more affordable options. This has led to an increase in demand for lower-priced units and a decrease in demand for higher-priced units. As a result, some landlords have had to lower their rents to keep their units occupied, which has contributed to the rise in vacancy rates.
Impact on the rental market The COVID-19
Finally, changes in the way people work and live have also had an impact on the rental market. The COVID-19 pandemic has accelerated trends such as remote work and flexible schedules, which have allowed some people to move out of expensive urban areas and into more affordable suburban or rural areas. This shift in demand has also contributed to the increase in vacancies in some urban areas.
While the rise in vacancies may be seen as a negative trend for landlords and property owners, it can be a positive development for renters. As vacancy rates rise, landlords may be more willing to negotiate on rent prices and offer more incentives to attract tenants. This can create more affordable options for renters, especially those who are struggling to keep up with rising rental prices.
However, the rise in vacancies could also have some negative consequences for the broader housing market. If vacancy rates continue to rise, it could lead to a decrease in construction activity and a slowdown in the overall economy. Additionally, if landlords are unable to fill their units, they may be forced to lower their rents to a level that is unsustainable, which could lead to financial difficulties for property owners.
The rise in apartment vacancies for the first time in six years is a sign that the housing market in the United States is changing. While the increase in vacancies may be a positive development for renters, it could also have negative consequences for landlords and the broader economy. It will be important to closely monitor this trend and its impact on the housing market in the coming months and years.