Apartment Rent Growth in the U.S. Drops to its Lowest Level in 4-1/2 Years

"This is just one more indication that the U.S. economy has continued to weaken during the last several months and that the apartment market is being negatively affected as well, contrary to what some may have initially thought," AXIOMETRICS President Ron Johnsey stated.

Johnsey said that the results for 3Q08 show not only that effective apartment rent growth had substantially slowed from one year ago-with an overall increase of only +.8% in effective rent from 3Q07-but also that occupancy rates had dropped by -0.7% to 93.5%. (All measurements are based upon the same apartment communities in each time period.)

A copy of AXIOMETRICS' survey results for 3Q08 for the largest 88 markets can be downloaded from its web site at http://www.axiometrics.com, News.

Annual rent-growth trend. During and after the last recession that ran from March to November of 2001, the economy lost about 1.8 million jobs from 2001 through 2003, the principal demand-driver of for-rent apartment housing. Over that period, annual effective rent growth was negative for nine consecutive quarters from 4Q01 to 4Q03. After this 2.25-year downturn in the apartment market, the market began its recovery in the first quarter of 2004 when annual rent growth turned positive at +0.6%. The 3Q08 annual growth rate in rents of +0.8% is the lowest of any quarter since then. The apartment market is expected to worsen into 2009 as the U.S. economy continues to lose more jobs; so far in 2008, the U.S. economy has lost over 760,000 jobs and the unemployment rate has increased from 4.7% in September 2007 to 6.1% in September 2008.

Quarterly rent-growth trend. The rate of quarterly rent growth in the third quarter of +0.2% was the second lowest rate of growth for a third quarter since 1996 and well below the long-term average growth rate for a third quarter of +1.3%.

Vacancy-rate increases from a year ago. The national vacancy rate increased by +0.7% from a year ago to 6.5% in 3Q08, which is the highest third quarter vacancy rate since +6.6% in 3Q03

The markets with biggest declines in annual effective rent growth compared to a year ago:

Annual Effective Rental Rate Growth

    Market                                         3Q07                3Q08

    Austin              TX                         5.6%                0.9%

    Charlotte           NC                         4.5%               -0.7%

    Chicago             IL                         4.1%                0.6%

    Lake County         IL                         4.2%               -1.4%

    Los Angeles         CA                         3.2%                0.0%

    Portland            OR                         6.0%                1.9%

    Raleigh             NC                         4.4%               -0.3%

    San Jose            CA                         9.2%                3.2%

    Santa Ana           CA                         3.3%                0.2%

    Virginia Beach      VA                         3.6%               -0.6%

The markets with improved annual effective rental rate growth compared to a year ago:

    Annual Effective Rental Rate Growth

    MSA                                            3Q07                3Q08

    Boston              MA                         0.6%                2.5%

    Birmingham          AL                         0.3%                2.0%

    Durham              NC                         2.2%                3.4%

    San Diego           CA                         2.8%                3.8%

    Washington          DC                         0.0%                2.4%

AXIOMETRICS INC. is a national apartment research company headquartered in Dallas, Texas. AXIOMETRICS surveys on a monthly basis apartment properties in approximately 300 markets covering 49 states and issues a monthly report on the results. The quarterly reports are an average of the results from each of the three monthly surveys made during a quarter, providing its clients a more reliable result than random sample surveys made only once per quarter. AXIOMETRICS' survey's 100% of it is properties each month, a sample is never used. All measurements are based upon the same communities in each time period.

SOURCE AXIOMETRICS INC.

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