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Chrisman's Corner: Supply and Demand Shifting

JMAC’s experienced brokers watch trends in vacancy rates. Just like I in the hotel business, where a 0% vacancy rate indicates that more hotels should be built, national rental vacancy rates indicate when more houses, apartments, or condos should be built.
The national rental vacancy rate has dropped from 8.2 percent at the end of 2013 to 7 percent at the end of 2014, the lowest level since 1993 when it was only 6.9 percent. Even though rent prices are increasing, vacancy rates are dropping, making it difficult to find a place to live. In survey, Zillow’s analysis of the 75 largest metro areas in the United States showed that the West coast had the lowest vacancy rate compared to other parts of the country with an average rate of 4.8 percent. (The South has the highest rental vacancy rate, particularly in Texas.) The state with greatest amount of rental vacancy as a whole is Florida, as every metro area studied is at or above the national average.
So what does this mean? Obviously California and other markets that JMAC lends in are seeing renewed household growth. This is coming from immigration, both from Mexico and Central America, as well as Asia. There is also an increase in people in their 20s and early 30s moving out from their parent’s houses into apartments or homes of their own. 
With this shift come not only higher rents but increased property values as well. Many of our brokers work in communities that have a lack of housing inventory. And a simple grasp of supply and demand suggests that if rents and property values continue higher, more supply will come onto the market from builders. Many parts of the West and other areas of the nation are seeing exactly that.