Las Vegas apartment rent prices continue to fall

Apartment rents in the Las Vegas Valley continued to fall while occupancy rose slightly in the third quarter, business advisory firm Applied Analysis reported.

Average asking rent at professionally managed apartment complexes fell 0.8 percent from the previous quarter to $760 a month, or about 84 cents a square foot, the research firm said. Rents have decreased 9.1 percent from $841 in third quarter of 2009.

Elevated unemployment levels, particularly in construction and hospitality, create a competitive market for apartment owners seeking tenants in an environment of limited demand, Applied Analysis principal Brian Gordon said.

Also, the inventory of homes for sale in Las Vegas swelled by 28.3 percent, or 3,500 more homes, during the quarter, which could spur some apartment renters to consider buying a home at depressed prices.

Apartment property owners’ ability to service debt obligations remains challenging, a condition that will likely persist beyond next year, Gordon said.

Average occupancy nudged up to 91.9 percent during the quarter, compared with 90.7 percent in the previous quarter and 91.1 percent a year ago. It remains below historical norms of 93 percent for the past five years and 93.6 percent for the past 10 years.

The slowdown in price declines for several quarters suggests that the apartment market may be reaching the proverbial bottom, Gordon said. Still, the local economy doesn’t look the same as it did a few years ago when multifamily properties were changing hands at a premium price, he said.

Online rental listing site Rentjungle.com showed average apartment rent in Las Vegas at $1,003 in the third quarter, compared with $995 in the previous quarter and $976 a year ago.

Has the rental market turned the corner?

“With Vegas, it’s hard to say,” said Jon Pastor, chief executive officer of Rentjungle. “Rents were up in the second quarter, then flat in the third, which is encouraging, but not as good as some other markets that were up both quarters. But also not as bad as some markets that continue to slide like Cleveland and Detroit.”

Multifamily housing specialist Spencer Ballif of CB Richard Ellis said his survey showed 10.12 percent vacancy for September and rents declining by $7 for the year to about $786 a month.

“There’s not going to be any stabilization or improvement in the market until we see steady job growth and I don’t see that anytime soon,” Ballif said.

He said it’s impossible to quantify the inventory of “shadow” home rentals, or single-family homes for rent. Nearly half of foreclosures are being purchased by cash investors, with some returned to the rental pool and others sitting empty for whatever reason, Ballif said.

Some reports indicate that the huge drop in Las Vegas home prices has made it more affordable to buy than to rent. Las Vegas ranked No. 10 among the 50 largest U.S. cities in price-to-rent ratio comparing average list prices with average rents, according to Trulia.com.

The real estate website showed an average list price of $128,815 for Las Vegas in June, compared with an average rent of $983 a month, or a 10.92 price-to-rent ratio. Minneapolis was No. 1 with a 7.54 ratio and New York was last with a 32.59 ratio.

Las Vegas led the nation for listing price reductions during the summer months. Trulia reported that 29 percent of homes currently for sale in Las Vegas have reduced their prices since they’ve been on the market, compared with only 10 percent in June. That means $127.7 million has been chopped off prices of homes now on the market.

“In Vegas, homes do look quite affordable if you compare median home price as a multiple of median rent,” Rentjungle’s Pastor said. “(It’s) much more affordable to buy in Vegas than buying in large cities in California, for example.”

Pastor said he’s seeing some positive signs in the overall national rental market for the second straight quarter. Nationwide, one-bedroom apartments had the largest rent increase of 7 percent to $1,034 a month, while two-bedroom units rose 5 percent to $1,284 a month.

Rentjungle analyzes more than 1 million apartment listings a month to make its calculations, tracking when new rentals come on the market and when rents for a particular property change.

Contact reporter Hubble Smith at hsmith@reviewjournal.com or
702-383-0491.

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