Economy Watch: Apartment Market Continues to Tighten

Apartment vacancies nationwide continued to shrink in the first quarter of 2013, according to a report by Reis Inc.

By Dees Stribling, Contributing Editor

Apartment vacancies nationwide continued to shrink in the first quarter of 2013, according to a report by Reis Inc. released on Wednesday. Vacancies fell by 20 basis points during 1Q13, dipping to 4.3 percent. Over the last four quarters, national vacancies have declined by 70 basis points, a much faster pace than any other CRE sector.

Reis notes that apartment vacancies have now fallen by 370 basis points since the cyclical peak of 8 percent, which was recorded back in late 2009. By contrast, office market vacancies have only fallen by a miserly 60 basis points since fundamentals began recovering five quarters ago.

The apartment sector absorbed a net of over 36,000 units in the first quarter. However, Reis adds, apartment owners only have another quarter or two of tight supply before a large raft of new properties come online—some 100,000 units will be added to the market nationwide this year, mostly in the second half of the year.

Home prices increasing briskly, especially in California

CoreLogic said on Wednesday that home prices nationwide, including distressed sales, increased 10.2 percent in February 2013 compared to February 2012. That’s the largest year-over-year increase since March 2006. On a month-over-month basis, including distressed sales, home prices were up 0.5 percent in February 2013.

Take distressed sales out of the equation and U.S. home prices increased year-over-year at nearly the same rate: 10.1 percent in February 2013. Month-over-month, the increase was 1.5 percent in February. In CoreLogic’s calculations, distressed sales include both short sales and REO transactions.

“The rebound in prices is heavily driven by western states,” Mark Fleming, chief economist for CoreLogic, noted in a press statement. “Eight of the top 10 highest appreciating large markets are in California, with Phoenix and Las Vegas rounding out the list.”

ADP reports middling jobs growth

Ahead of the official employment numbers on Friday, Automated Data Processing made its usual monthly report on private hiring, finding that 158,000 private-sector jobs were created in March. That compares unfavorably to last month’s revised report, which found that 237,000 private-sector jobs were created.

Also on Wednesday, the Institute for Supply Management reported that its Non-Manufacturing Index came in at 54.4 percent in March, 1.6 percentage points lower than in February. The drop indicates continued growth at a slightly slower rate in the non-manufacturing sector.

Wall Street dropped on Wednesday, perhaps in response to the relatively weak numbers of the day. The Dow Jones Industrial Average lost 111.66 points, or 0.76 percent, while the S&P 500 and the Nasdaq declined 1.05 percent and 1.11 percent, respectively.

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