Multifamily Vacancies Increase as More First-Time Buyers Purchase Homes

By Erika Schnitzer, Associate EditorWashington, D.C–Multifamily vacancies are on the rise, according to preliminary information from the Commercial Real Estate Outlook of the National Association of Realtors (NAR).”We have been seeing, over the last two years, relatively tight vacancy rates because of the slowdown in home sales,” says Walter Molony, a spokesman for NAR. “This will change, as sales are expected to pick up.” Because of this, multifamily vacancy rates are expected to rise to 5.7 percent in the fourth quarter of 2008, up from 4.8 percent in the fourth quarter of 2007.”To the extent that people have secure jobs, there’s a need and desire to get into home ownership, especially with affordability being at a favorable level,” Molony explains. “We’re going from a situation where people can’t meet the terms of their mortgages to being able to afford financing.”Additionally, the report forecasts that rents will rise 4 percent this year, up from a 3.1 percent increase in 2007. “Rent is related to supply and demand cost, and there are more inflationary pressures this year,” Molony tells MHN.This year’s multifamily net absorption is 219,900 units in 59 metro areas, down from 230,900 units last year. In addition, transaction volume is down at $13.7 billion so far this year, compared to $23.2 billion at the same time last year. However, certain areas, such as San Francisco and northern N.J., have lower vacancy rates due to demand.A quarterly report, Commercial Real Estate Outlook analyzes trends for the multifamily, office, industrial and retail sectors. The full report will be published in early July.