BiggerPockets

http://online.wsj.com/article/SB125479559237566623.html?mod=rss_economy

This article is talking about apts nationally. Vacancies continuing to rise and article says they will continue to rise. Tied to unemployment figures. Are you apt owners finding this rise? My 154 units in Dallas has actually dropped from 18 to 8 the last 2 months. Rich in TX

By the way, my "favorite" applicant that I turned down: she was on Section 8 and owned 3 horses. She also took in rescue horses occassionally.

So she was spending $600-$900 a month on pet horses while the taxpayers paid 100% of her $600 rent. Sorry, not in my house.

Are these people moving into their parents' homes? Now that new apartment construction has virtually come to a hault, I would think that population growth should take care of the vacancy rate over the medium term.

Interestingly, the Census data shows that there is a population bulge that should increase the number of people in their 20s over the next ten years or so. This means more college grads and more tenants for 1 and 2 bedroom units in cities. This might be the best time to buy an apartment building because we may not be too far from the bottom of the market.

Good replies and good cross section with different areas. Rich

Recently in our area, reality seems to have finally sunk in.

The economic realities have begun to cause rental owners to really react and aggressively cut prices on their units.

No new jobs, layoffs, less income, people leaving the area.

Both SFR and multi-family are affected and those with no mortgage or lower runtime cost structures have more flexibility with their pricing and are able to find tenants, though no where near the quality of yesteryear.

Previous to this year, rents had remained fairly stable maybe down 5-10% but nothing compared to the 20% we are beginning to see now as desperate owners are realizing that they may lose their investments if they do not find tenants.

The lower quality tenants actually have their pick of units now versus unable to find anything.

As far as investing in new properties, it is a dangerous game if not backed by cash reserves, today's "low-money-down" owner is tomorrow's foreclosure.

We see nothing on the horizon to change this pattern, rents will seemingly continue to drop and day-to-day management will continue to take more time and effort due to the lower quality.

Seems to be a national thing and not just a local problem.

Originally posted by Tim Wieneke

Does this vacancy rate take into account forced vacancies through foreclosure on the building owner?

In my opinion, not yet, but it soon will...

Most apartment owners who are in default of their mortgage are not getting foreclosed on (yet). The banks aren't carrying high enough cash reserves (despite the ridiculous amounts of TARP money they have) to foreclose on the large commercial buildings that they hold paper on, so the owners in default are basically collecting rent without making their payments.

At some on in the near future, either with additional TARP money, increased sales over the past several months from the tax credit incentive, and/or the eventual flood of REO properties to the market, banks will have the cash reserves to be able to start taking back non-performing commercial collateral.

Purely in my opinion, what we've seen in the residential market the past two years will hit the commercial market (apartments, retails, etc) even worse.

So, all that said, I don't think there are a whole lot of people getting kicked out of apartments these days due to foreclosure, but it's certainly going to start happening soon.

The question will be whether the increased demand will negate the downward price pressure on rents due to unemployment, increased supply, etc. Best case, there will be plenty of renters, vacancy will decrease, and rental rates will stay flat. Worse case, there will be plenty of renters, vacancy will stay flat, but rental rates will decline.

Again, just my opinion...

Personally, I'm sitting on the sidelines waiting to pick up a couple hundred apartment units when the real bloodbath begins (and all the over-leveraged apartment owners are finally forced to give up their properties)...

My worse two months in business of 24 yrs has been the last 2months. But the problem is not vacancies but nonpayment of the rent has led to more evicts than I have ever done. I agree that the quality of applicants has gone down a ways and I rent what is considered the bottom of the barrel trailerpark homes. I may go broke but I still will not rent to criminals or previous evicts. Therefore I have the safest community in the county I am located in.

i checked with the property management company we work with and they said they are at 10% vacancy.
I know they manage something over 200 units.
Not sure if trend is up or down though

I'm not in the MFR business but I'm curious to know. Where are all those people go? Short of moving back with the folks, they either have to buy or to rent somewhere. Are they all "first-time-buyers"? I find it hard to believe that all those people are moving back with their parents....