by Calculated Risk on 7/07/2011 12:32:00 AM

Reis reported that the apartment vacancy rate (82 markets) fell to 6.0% in Q2 from 6.2% in Q1. The vacancy rate was at 7.8% in Q2 2010 and peaked at 8.0% at the end of 2009.

From the WSJ: Rents Rise, Vacancies Go Down

Vacancies ... fell in 72 of the 82 markets during the second-quarter vacancy rate to 6%, the lowest since 2008 and compared with 7.8% a year earlier, according to Reis.
...
The average effective rent, the amount paid after discounting, was $997 in the second quarter of the year, up from $974 a year earlier ...

Landlords filled a net 33,000 units in the second quarter, a slowdown from the 45,000 units they filled in the first quarter.
...
Meanwhile, supply remains constrained. Roughly 8,700 new apartment units opened during the second quarter, the second-lowest quarterly tally for new completions since Reis began collecting data in 1999.

Click on graph for larger image in graph gallery.

This graph shows the apartment vacancy rate starting in 2005.

Reis is just for large cities, but this decline in vacancy rates is happening just about everywhere.

A few key points we've been discussing:
• Vacancy rates are falling fast (the excess supply is being absorbed). Note: The excess housing supply includes both apartments and single family homes.

• A record low number of multi-family units will be completed this year (2011). Only 8,700 apartments came on the market in Q1 (in the Reis survey area). This is the second lowest quarter since Reis has been tracking completions - the lowest was 6,000 last quarter.

• The falling vacancy rate is pushing push up effective rents. This also pulls down the price-to-rent ratio for house prices.

• Multi-family starts are increasing, and that will help both GDP and employment growth this year. These new starts will not be completed until 2012 or 2013, so vacancy rates will probably decline all year.