Real Estate Rental Update

Apartment vacancies hit a 30-year high in the fourth quarter, and rents fell as landlords scrambled to retain existing tenants and attract new ones.

The vacancy rate ended the year at 8%, the highest level since Reis Inc., a New York research firm that tracks vacancies and rents in the top 79 U.S. markets, began its tally in 1980.

Few markets have been spared. During the fourth quarter, vacancies increased in 52 markets, while they improved in 17 and stayed flat in 10.

Vacancies are tied to unemployment, because many would-be renters move in with family members or double up during a downturn. Apartments have been squeezed because younger workers, who are more likely to rent, have experienced the brunt of job losses during the downturn.

"If you are renting a place, now might be a good time to renegotiate that lease," said Victor Calanog, director of research for Reis, who added that the sector could see a recovery in the second half of the year, buoyed by either job growth or at least the perception that the economy was turning around.

Government efforts to prop up the housing market also threaten the apartment sector by making it easier for some renters to buy homes. Some landlords have reported a slight uptick in renters moving out to buy homes.

Thanks to falling home prices and record low mortgage rates, it now costs less to own than it has in the past decade on a mortgage-payment-to-rent basis. But falling rents are expected to offset some of the recent improvement in affordability, making renting more attractive than owning in some markets.