The apartment market in the U.S. remained sluggish in the third quarter as the vacancy rate climbed to its highest level in five years.
In all, apartment vacancy rates increased in 50 of 79 metropolitan areas, with many major cities experiencing high levels of construction that outstripped demand, according to data released this week by apartment-tracker Reis Inc.
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The vacancy rate for apartments across the U.S. climbed to 4.5% in the third quarter from 4.1% in the same quarter a year earlier, according to Reis.
"I think that's a sign of what's to come for the rest of the year," said Barbara Byrne Denham, a senior economist at Reis.
Construction activity was lower than expected, due in part to severe labor shortages, suggesting there may be more pain ahead as units continue to come online. Hurricanes created disruption in Florida and Houston, which may delay completions in two major markets.
In Houston, rents increased 1.1% during the quarter and the vacancy rate fell 0.1%, but those data don't yet include the effect of Hurricane Harvey.
Charleston, S.C., suffered the biggest increase in the share of empty units, with a 2.6 percentage point jump in the vacancy rate from a year earlier.
The New York, Salt Lake City and Nashville metropolitan areas all experienced large increases as well.
Rent growth remained relatively robust considering the increase in vacancy, suggesting landlords are choosing to hold the line on price and let apartments sit empty if necessary. Average rents increased 3.3% in the U.S. in the third quarter compared with a year earlier.
Despite the large quantity of new supply, the rental market remains relatively robust because rising prices and a lack of supply are keeping many would-be buyers out of the market.
"You're seeing that the housing market is keeping people from buying a house because it's getting more unaffordable," Ms. Byrne Denham said.
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(END) Dow Jones Newswires
September 26, 2017 14:13 ET (18:13 GMT)