U.S. apartment vacancies dropped to 5.2 percent in the fourth quarter, a 10-year low, as more Americans flocked to rentals, according to real estate research firm Reis.
The vacancy rate was 5.6 percent in the third quarter of 2011 and 6.6 percent during the fourth quarter of 2010. It has dropped for seven straight quarters after hitting 8 percent at the end of 2009.
As demand increased, asking rents rose 0.4 percent, while effective rents rose 0.5 percent to $1,009 per month, with 90 percent of markets reporting higher effective rents.
Although the rental market generally cools during the winter due to seasonal patterns, activity continued through the end of 2011.
The fourth quarter tends to be a weaker leasing period given that most households make moving decisions in the second and third quarters, but the apartment sector exceeded expectations once again, ostensibly due to heightened economic activity in the last three months, said Victor Calanog, head of Reis' research, in a statement.
New Haven, Conn., where Yale University is located, had the nation's lowest vacancy of 2.1 percent in the fourth quarter, followed by New York City; Minneapolis; Portland, Ore., and San Jose, Calif. San Francisco had the highest annual rent growth of 1.7 percent to $1,865 per mointh, followed by San Jose; Chattanooga, Tenn.; Austin, Texas, and New York.
Rental supply has tightened as more people avoid the troubled sales market, which continues to see home values drop. There has also been a dearth of new multifamily construction, with only 8,865 new units becoming available in the fourth quarter, according to Reis, the second-lowest level since 1999. In total, only 37,678 new rental units were completed in 2011, the lowest amount in Reis' records dating back 31 years.
But new construction has picked up, with housing starts increasing to a 19-month high in November and multifamily housing increasing 180.5 percent from the previous year, according to the federal government. An increase in rental supply could led to a slowdown in rent growth.