Home Sales Down in July but Multi-Family Rentals Still Hot

August 19, 2011
By Nicholas Ziegler, News Editor

While the battle for July home sales may have been lost, the war for yearly sales has been won: According to the National Association of Realtors, existing-home sales — a metric that includes single-family units, but also townhomes, condos and co-ops — fell 3.5 percent from June to July of this year. While that drop leaves last month showing 4.67 million home sales, the number is still 21 percent above the 3.86 million-unit pace from July 2010, when the home-buyer tax credit expired.

Despite the drop, the rental market remains hot. According to a report by Marcus & Millichap, “Healthy employment growth expectations and tight vacancies advanced New York City two places to the #1 spot in the [National Apartment Index], bumping Washington, D.C., to #2. California markets also fared well in the index due to perennial supply constraints that will keep vacancy steady and generate some of the strongest effective rent gains.”

Even the markets toward the bottom of the rankings pulled gains, as well: “While Florida markets rank near the bottom of the NAI, all reflect a broad-based regional vacancy rate recovery. Both central and coastal Florida metro areas strengthened in the ranking; Orlando (#30) and Fort Lauderdale (#34) advanced five positions, while Miami (#21) and Tampa (#36) improved four spots,” the report notes.

Lawrence Yun, chief economist for the NAR, underlined the cyclical nature of the market. “Affordability conditions this year have been the most favorable on record dating back to 1970, but many buyers are being held back because banks are offering financing to only the most highly qualified borrowers, ignoring a large share of otherwise creditworthy buyers,” he said. “Those potential buyers represent the difference between an uneven recovery and a much more robust housing market that could stimulate additional economic activity and create jobs.”

Existing condominium and co-op sales were unchanged at a seasonally adjusted annual rate of 550,000 in July, and are 17.3 percent above the 469,000-unit pace one year ago. The median existing condo price was $168,400 in July, down 4.0 percent from July 2010. Because there is a concentration of condos in high-cost metro areas, the national median condo price often is higher than the median single-family price. In a given market area, condos typically cost less than single-family homes.

All 44 markets nationwide are expected to see employment growth, vacancy declines and effective-rent gains in 2011, confirming a sweeping recovery and expansion in the U.S. apartment sector above expectations. This year will mark the first across-the-board reduction in vacancy since at least 1990. This is driven by the release of pent-up demand in the aftermath of the Great Recession, lower turnover rates, falling homeownership and job growth, according to Marcus & Millichap.