In July 2015, the U.S. Census Bureau released its annual report on rental and homeowner vacancies. The report shows that rents are soaring, while vacancies in the U.S. have plummeted to their lowest recorded level since the 1980s. While many Real Estate professionals are rejoicing over this report, others are waiting for the bubble to pop as new apartment construction continues to surge.

How New Construction Lends Itself to Future High Vacancy Markets

Throughout the country new apartment construction has continued to surge to meet the ever-growing demand for renters. This surge has been in response to the current low-vacancy renter's market. The market has created a surge in rental prices, as an increased number of renters flock to new apartment buildings. However, real estate experts predict that in certain markets the influx of new apartments is likely to create a renting bubble as more apartments are made available to a decreasing crowd of tenants.

The larger the number of available rental units, the greater the competition to attract tenants. Increased competition can mean that property managers are forced to cut rental prices or offer concessions, in order to more quickly rent their vacant apartments. A larger number of rental units can also lend itself to higher vacancies, as applicable tenants continue to "shop around" for the best deal. To combat this potential high-vacancy market, property managers need to focus their strategies on the future market space, rather than rejoicing over the current low-vacancy market.

Current Real Estate Statistics:

●        Homeownership rate recently dropped to 63.4%, the lowest since 1967.

●        The number of occupied housing units grew, but only from the renter's perspective.

●        Apartment supply is still far lower than demand and apartment occupancy recently hit 95.2 percent.

Tips To Prepare For a High Vacancy Market

The Bloomberg news network recently stated that, "historically low borrowing costs, combined with rising rents, may also make home-buying more compelling.” A more compelling home-buying market combined with an abundance of rental units is a recipe for a high-vacancy market. While a high-vacancy market might not occur this month or even this year, experts predict that it’s waiting around the corner. You can apply the following three tips to become better prepared for a high-vacancy market.

Tip 1: Study renter and development trends over the past 5-10 years. Look for similar patterns between rising construction and an increase in vacancies.

Tip 2: Study the local economy and job market. Are more jobs being created in the area? Has the rate of employment increased? By studying the employment market, you will be in a better position to determine if more individuals will be moving to the area.

Tip 3: Review market demographics. Determine the typical demographics for renters in your area. Next, study census data to see if these numbers are on the rise. Look for patterns and other influencing data that can help you to better predict when the number of renters will become stagnant. When the number of renters fails to increase, while new constructions continue to rise, you will soon find yourself in a high-vacancy market.

By keeping these tips in mind, studying the latest homeowner and renter data reports, and remaining cognizant of both the national and local markets, real estate professionals will be better equipped to adapt to both low-vacancy and high-vacancy rental markets.