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Supply Imbalance Won't See Correction Until 2010

The multifamily market will feel the weight of the inventory overhang for at least a couple more years.

By Sule Aygoren Carranza | Updated on October 20, 2008

WASHINGTON, DC-The excess supply of for-sale single-family and condominium residences continues to weigh heavily on the multifamily sector, and a correction isn’t expected until at least 2010. That’s the take of Mark Obrinsky, vice president of research and chief economist for the National Multi Housing Council, on the market.

On one hand, the meltdown in the housing and mortgage markets have been a boon for apartments, since fewer people are leaving the rental pool to buy a home. On the other, the excess inventory of available housing is applying pressure on traditional units as those residences hit the rental pool. Given the situations, Obrinsky doesn’t expect the housing market to correct the supply-demand imbalance for another two years, at best.According to Census Bureau data from midyear, there are 6.2 million for-rent and for-sale units on the market, resulting in a 4.8% overall vacancy rate. Four million of those are rentals, creating a 10.1% vacancy rate for that group.

Between 1965, when the Census Bureau began to track inventory, and 2003, the overall vacancy never surpassed the 4% mark. Yet on the for-rent side, the vacancy is far from record levels, points out Obrinsky. Therefore, the bulk of that overall vacancy surge is attributable to the for-sale inventory, which is at its highest levels since before 2007. Before 2000, the rate never topped 1.6%. Today, available owner-occupied units account for 2.8% of the inventory.

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