Glut of New Supply Shaking Up the Apartment Market

Laura Kusisto reports: "The apartment market boom of the past several years appears to be topping out, according to data set to be released Thursday by real-estate researcher Reis Inc."

The proof is in the vacancy rate pudding, according to the article: "Increasing supply sent the vacancy rate up to 4.3% in the third quarter from 4.2% in the second quarter, which matched the lowest since the recession." The same data expects an additional 200,000 units to hit the market this year, pushing vacancy rates even higher.

Renters shouldn't expect relief from soaring costs just yet, however. Kusisto cautions: "Rents can continue rising even as vacancies tick up because new rental units coming onto the market usually bring higher rents, boosting the average. For example, the vacancy rate in San Jose, Calif., jumped to 3.3% from 2.7% in the previous quarter, while Seattle’s vacancy rate rose to 5.1% from 4.7%. But rents in San Jose and Seattle increased 8.5%, to $2,023 and $1,299, respectively."

The national picture laid out by Kusisto echoes an earlier report by Douglas Feiden, who cited industry experts describing a rental property supply glut in Brooklyn [paywall]. According to Feiden, "[t]he first telltale signs of a softening of the white-hot Brooklyn rental market have come into view. As a torrent of new inventory washes across the borough, a handful of REITs, analysts and developers are sounding warnings about a possible supply glut that could play out over the next couple of years."