It would seem to me that the vacancy rate would somewhat mirror the unemployment rate. If you lose your job, you probably will not be able to afford rent. Right? That certainly was my thinking. We were bracing for a 9 % to 10 % vacancy rate, which would certainly lead to a further decline in rental rates. Being that rental rates had already begun to deteriorate in 2009, that was not the best news for our clients or for us.
Up until about 9 months ago, the vacancy rate seemed to be trending in that direction. Tenants that lost their jobs were moving back in with family or friends. Our vacancy rate was starting to inch up a bit, and then by mid summer it all seemed to change.
We are currently sitting at a vacancy rate of just over 3%. What we have learned is that you can do without a car, and even a job, but you must have a place to live. We have quite a few tenants and clients for that matter that are unemployed, but they are still paying their rent. How is that possible? Cashing out stocks, spending savings, help from family/friends, charities and unemployment are just a few options to mention.
Another statistic that seems contrary to the basic laws of supply and demand is the 3% vacancy rate. In our experience, when the vacancy rate was around 5% or lower, we would start to see upward pressure on rents. Less supply, higher rental rates right? Not exactly. Rental rates certainly seem to be leveling off, but to date no real increase to speak of.
Tenants are more realistic and quite frankly more savvy than in the past and are no longer willing to get themselves into a bad financial situation. Even if they are gainfully employed, there is still a pervasive feeling of fear regarding the economy. That said, to date we are not seeing an increase in rents, but as I stated previously, they have begun to level off.
