Reis Predicts Weak Household Formation through Second, Third Quarters

By Erika Schnitzer, Associate EditorNew York–A slowdown in household formation and additional condo completions will counter-balance stronger demand for apartments, according to Reis Inc.’s “First Quarter Apartment, Office and Retail Sector Trends.”According to Reis’ forecast, the slowing economy will continue to weaken household formation in the second and third quarters. Recent college graduates will have difficulty finding jobs, and will be forced to move home, thus cutting into the household formation rate. Additionally, Sunbelt metros are grappling with additional condo completions, Reis points out. Renters are seeking out condominiums for rent, an activity that is partly responsible for a relatively lower net absorption of 6,640 multi-housing units in the first quarter, according to Reis. (Multifamily completions in the first quarter totaled just under 17,000 units) Reis also reports that apartment vacancies have already increased by 30 basis points in the first quarter, and effective rent has fallen short of asking rent, despite higher demand for apartments. Vacancy rates, says Reis have risen most dramatically in Florida markets over the last year.