Nation’s Unemployment Rate Rises to 7.2%, but Apartments May Not Be Hurt As Much This Time

By Keat Foong, Executive Editor Washington, D.C.–Rising unemployment may not hurt the apartment market as badly as in the past, said an industry observer. The government reported the unemployment rate jumped in December to 7.2 percent—reportedly the highest rate since January 1993. Some housing economists have forecasted that the unemployment rate will not turn up until the later part of 2010. The National Association of Home Builders projects it may flatten to 8.1 percent by the beginning of next year. But many economists generally are projecting the unemployment rate to be over 9 percent by the end of 2009, and President-elect Barack Obama has said that unemployment could reach into the double digits. “It does not feel like there will be an end in sight to the [rise in] unemployment, but things will turn around,” commented Dave Hendrickson, managing director of the Real Estate Investment Banking Group of Jones Lang LaSalle, Chicago. Hendrickson expects apartment vacancies to decline throughout 2009 as consumers double up in their living arrangements in the face of continuing job losses. “I’ve lived through a number of cycles. Every time there is a recession and job losses, the vacancy rate does increase,” he said. However, Hendrickson added that this cycle, the single-family downturn will help cushion the apartment market from any severe downturn. Despite the shadow inventory, apartments will benefit as renters refrain from buying homes and as homeowners move out of foreclosured homes. “This time, there are counterbalancing forces. Vacancy rates will probably not increase as much as they have in the past,” he said.