Apartment Forecast, August 2009Thus, new demand for the second half of 2009 is expected to be negative 6,441units, but for the whole year it is expected to be positive, as the NAR/TWR apartment forecast predicts that the occupied apartment stock will increase by 30,066 units. It should be noted that the predicted net absorption for 2009 is higher than the increase in the occupied apartment stock in 2008, which amounted to 24,390 units. NAR/TWR predict though that rental apartment demand will rebound in 2010, as 154,546 apartment units are expected to be absorbed in the first half of the year and 91,886 in the second half, resulting in a total absorption of 246,432 apartment units for the whole year. Given the deteriorating market conditions, apartment completions are predicted to decrease by 28% and 26% in the third and fourth quarter of 2009, respectively. More specifically, the NAR/TWR apartment forecast predicts that completions in the third and fourth quarter of 2009 will drop to 40,032 and 29,578 units, respectively, from 55,638 in the second quarter. Apartment completions are predicted to continue decelerating in 2010, with 36,073 units expected to be completed in the first half of the year and 28,561 in the second half, resulting in total apartment completions of 64,634 units for the whole year. It should be noted that this will represent a 62% drop compared to the total completions of 168,279 predicted for 2009. The US apartment vacancy rate, which increased in the first half of this year from 6.1% to 7.4%, is expected to remain stable in the third quarter, as net absorption and new completions are expected to be at about the same levels. However, in the fourth quarter of 2009, the declining demand (negative net absorption) and rising supply, due to new completions, are expected to push the US apartment vacancy rate up to 7.9%. However, the NAR/TWR apartment forecast predicts that in 2010, rebounding apartment demand and decelerating apartment stock growth rates are expected to create the dynamics that will push the vacancy rate down. As a result of these developments, the national apartment vacancy rate is predicted to decline to 7.1% by the end of the second quarter of 2010 and average 6.9% for the whole year. As a result of the predicted supply-demand dynamics, the average US apartment rent, which declined 1.2% in the second quarter of this year, is expected to stabilize in the second half of 2009, registering a negligible drop of 0.1% in the third quarter and a minor increase of 0.4% in the fourth quarter. According to the NAR/TWR apartment forecast, in 2010, average apartment rents in the US are expected to remain practically stable and register a small increase of 0.8%, triggered by positive net absorption and declining vacancy rates. Although the NAR/TWR apartment forecast applies to the national level, it suggests that apartment property investors should carefully evaluate the dynamics of the local markets within which they operate before they assume any apartment rent increases for 2010 in their cash flow models.
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