Vacancy Rates, Rents, and Home Ownership

Since they directly affect the housing market on a local level, Nations Lending experienced loan officers closely monitor trends in vacancy rates.

Just like in the hotel business, where a 0% vacancy rate indicates that more hotels should be built, national rental vacancy rates indicate when more houses, apartments, or condos should be built.

The national rental vacancy rate has dropped from 8.2 percent at the end of 2013 to 7 percent at the end of 2014; the lowest level since 1993 when it was only 6.9 percent. Even though rent prices are increasing, vacancy rates are dropping, making it difficult to find a place to live. In a recent survey, Zillow’s analysis of the 75 largest metro areas in the United States showed that the West Coast had the lowest vacancy rate compared to other parts of the country with an average rate of 4.8 percent. The South has the highest rental vacancy rate; particularly in Texas. The state with greatest amount of rental vacancy as a whole is Florida, as every metro area studied is at or above the national average.

So what does this mean? Markets that Nations Lending lend in are seeing renewed household growth. This is coming from immigration from a variety of sources, as well as younger people marrying and establishing households: an increase in people in their 20s and early 30s moving out from their parent’s houses into apartments or homes of their own. They know it’s finally time to get off the couch!

With this shift come not only higher rents but increased property values as well. Many of our loan officers work in communities that have a lack of housing inventory. A simple grasp of supply and demand suggests that if rents and property values continue this upward trend, more supply will come onto the market from builders. Many parts of the Midwest and other areas of the nation are seeing exactly that.