Rental housing glut seen

Bloomberg reports:

The glut of U.S. properties for sale is about to hit the rental market.

A record number of homeowners who can't sell condominiums and houses are competing for tenants with the country's biggest apartment owners led by Chicago-based Equity Residential, said Jack McCabe, the founder of Deerfield Beach, Fla.-based McCabe Research & Consulting LLC. Metropolitan New York, where demand for housing exceeds supply, may be the only place where rents increase, albeit at a slower pace, he said.

"Competition already is forcing the big apartment owners to offer concessions like two months free rent," McCabe said.

Vacant rental apartments rose to 6.1 percent in the U.S. during the first quarter, the most in almost two years, even as the average monthly rent reached a record $991, said Sam Chandan, chief economist of New York-based real-estate research company Reis Inc. Vacancies will continue to rise through 2007, he said. New York had the lowest number of vacant units in the first quarter.

Nationwide, 2.8 percent of houses for sale were unoccupied in the first quarter, the highest since the Census Department started collecting the data in 1956. Unsold properties on the market totaled a record 3.45 million in 2006, according to the Chicago-based National Association of Realtors.

"Unsold properties being turned into rental units are creating a shadow market that's driving up the vacancy rate and slowing the growth of rents," Chandan said in an interview. "Areas that saw the most speculative investing, particularly in condos, will see the biggest pressure on rents."

Remember,square footage is square footage.Not everyone bought a second condo for long term ownership.