Job Losses Threaten Apartment Sector

August 6, 2008

By Reuters

The U.S. housing market’s life-support status for the past few years has helped reinvigorate the apartment sector, as tougher mortgage requirements helped landlords retain tenants, while the growing job market kept renters on the move.

But like the U.S. housing market, the U.S. apartment sector — and its investors — could soon find itself pining for days long gone.

Despite posting significant profits in the second quarter, most apartment companies have warned that the second half of 2008 won’t be so rosy.

“The collapse of the housing market has meant that there are fewer people leaving apartments to go buy homes,” said UBS analyst Alexander Goldfarb. “That sort of helped the back door. What comes in the front door is driven by jobs. Jobs and rent are highly correlative.”

Tenants — especially those in buildings owned by real estate investment trusts, which tend to have better properties — are unlikely to have been exiles of mortgage foreclosures, as their poor credit makes them unattractive tenants. But tougher borrowing requirements have helped landlords retain existing tenants and sent new job starters in their direction.

That has enabled landlords to push rents higher. Annual apartment REIT revenue-growth peaked at 5.9 percent in 2006, according to Dallas-based Axiometrics, which provides information to apartment developers and investors. Today, that growth level is about 3 percent.



Be Sociable, Share!
    Categories : National News

    Comments are closed.