Apartment-Vacancy Rate Tumbles to 2001 Level

In bay area, the rental has been strong in the past 2 -3 years. Some east bay rents of 4/2, 1800 sqft houses has increased from $1900 to $2300, a 21% increase in around 3 years.

See a Wall Street article below.

WSJ, 1/5/2012

The nation's apartment-vacancy rate in the fourth quarter fell to its lowest level since late 2001 as Americans continued to favor renting homes instead of buying them.

Rents climbed, but data firm Reis Inc. said the increase was less than expected. Landlords of properties intended for lower-income renters found it more difficult to raise prices, according to Reis.

In the fourth quarter, the vacancy rate fell to 5.2% from 6.6% a year earlier and 5.6% at the end of the third quarter, according to Reis. The vacancy rate rose as high as 8% in 2009.

During the depths of the downturn, landlords had to offer incentives such as flat-screen TVs and months with no rent to attract tenants. But in the fourth quarter of 2011, landlords in 71 of the 82 of the markets that Reis follows were able to raise rents.

Darlene Shaffron recently moved into a loft apartment that rents for $2,800 a month in Jersey City, N.J. She considered buying—and was preapproved for a mortgage—but was too scared to put money down on a home that could see its value decline in a volatile market. "If we went into a double-dip recession or something worse, then I would have spent all of the cash," the 40-year-old said. Ms. Shaffron decided to "save the money...and rent for a little bit longer."

Reis said the market has been weakened by job losses in the financial-services industry. Also, the city has the highest rent level in the nation—$2,876 a month—making it difficult for landlords to raise prices. By contrast, San Francisco's landlords managed a 5.1% gain over the past year, while San Jose climbed 5%, fueled by a booming tech sector. The higher-quality properties in the most desirable locations posted gains of over 10%, Reis said. 

The rental market also has been fueled by a dearth of new supply. Just 8,865 units were delivered in the quarter, the second-lowest quarterly figure since Reis began publishing quarterly data in 1999.

The strength of the market hasn't been lost on developers who are racing to move plans off their drawing boards.

More than 173,000 units were likely started in 2011 and some 225,000 and 280,000 starts are expected nationwide in 2012 and 2013, according to Zelman & Associates.
One concern for landlords is that the housing market will bottom or improve in 2012, which could curb rental demand. "Most any person or industry would be happy to see the single-family market stabilize, except for the apartment sector," said Richard Anderson, an analyst who covers apartment companies for BMO Capital Markets. "You're either an owner or a renter. There's no middle ground."