Freddie Mac reports that the multifamily housing sector is experiencing record vacancy rates because of two primary factors—rising unemployment and low household formation. Indeed, high jobless rates among teenagers (27 percent) and 20- to 24-year olds is forcing many to postpone household formation or to move back with their parents or friends, laments Freddie Mac chief economist Frank Nothaft.
Additionally, apartment vacancy rates have moved up in many markets as federal tax credits for first-time homebuyers have encouraged more renters to become homeowners. A recent Census Bureau study showed that the vacancy rate on communities with 10 or more apartments was 13.5 percent as of the end of Q3 2009. For apartments built since 2000, Nothaft adds that the vacancy rate is 23.2 percent, “reflecting in part the slow rental rate of newly built dwellings.”
The economist went on to quote a National Council of Real Estate Fiduciaries report, stating that multifamily property values have declined 29 percent from their mid-2008 peak. Finally, the FDIC states that the number of multifamily housing loans 90 days or more past due has doubled since 2008, topping 3.6 percent in 2009’s July-through-September period—the highest since 1993.
Source: Structured Finance News