Thursday, January 6, 2011

Apartment Market Improving

The fundamentals for the apartment sector continue to improve.  Rents are slowly rising across the country, and according to Reis vacancy rates fell in the fourth quarter from 7.1% down to 6.6%. 

As Americans continue to lose their homes to foreclosure they are moving into apartments as a transition.

Yesterday Trepp reported that the delinquency rate for mortgage backed securities for apartments rose to 16.8%, setting a new record high.

Most of these are loans that were created and packaged during the peak of the real estate bubble back in 2006 and 2007. 

This trend will also continue, meaning distressed properties will continue to enter the supply stream as the fundamentals of the market continue to improve with our country's population growth and limited new apartment construction entering the market due to the inability to finance projects and record high supply already in place.

The distress on the financial side of the market should continue and peak sometime between 2012-2014.  As interest rates rise, it will continue to push property prices down. 

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