~Data provided by ALN Apartment Data
Paradox of Increased Foreclosures and Falling Apartment Occupancy
Why do rents and occupancy continue to fall while foreclosures are on the rise, and new and existing home sales are down significantly YTD? Some economists explain that homeowners being forced from their homes through the foreclosure process are choosing to lease single-family instead of moving into an apartment. The effect is mild stabilization of single-family rentals and no effect to demand on apartment units.
The Job Market and Relocation
The lack of jobs and high unemployment rate are playing major factors in demand for apartment units. College graduates are choosing to move back home with mom and dad to save on expenses because there are no entry level jobs. Most large businesses have also frozen hiring in this recession. Shifting focus from expansion to internal efficiency, many companies have made aggressive cuts to budgets and projects, while others have completely eliminated or postponed them. The net effect is less demand for apartments.
Signs of Improvement
The apartment industry will only show signs of improvement through a significant worsening in the economy or an economic recovery that propels expansion and hiring. Apartment occupancies and rents show the most stability in the peaks and troughs of economic cycles.
If things get worse, consumers will be forced from their homes at greater rates and be forced to choose the most inexpensive housing options which remains to be apartment housing. If things improve, increased hiring and the consumer relocation that comes with it will increase demand on apartment units.