After the real estate market collapse, cities across the nation have suffered through foreclosure blight and a real estate market that just won’t seem to rebound. Those who own a home are typically either living with an underwater mortgage or desperately searching for a way to sell that home. As foreclosures and evictions lumber ever forward in record numbers, Florida’s housing market drops and drops. Without the ability to sell, few have the ability to buy.
What it all adds up to is vacant homes, and according to a recent analysis by Forbes magazine, Orlando has the highest vacancy rate in the nation for single-family homes — 8 percent, as of the start of this year. In the fourth quarter of last year, Orlando’s vacancy rate for rental properties was second only to that of Dayton, Ohio. When the annual rental and single-family home vacancy rates were combined and averaged among the nation’s 75 largest metropolitan areas, Orlando came out the worst on Forbes’ list of “America’s Emptiest Cities.”
Orlando’s high home vacancy rate blamed on condo conversions, overbuilding, economic crisis
According to Forbes, when apartment buildings were rapidly being converted into condominiums in the mid-2000’s, real estate developers believed that progression was natural. In fact, the wide availability of subprime, adjustable-rate mortgages and the new practice of securitizing bundles of mortgages into investment opportunities were creating the housing bubble.
To meet the continued demand for rental housing, developers built new apartment complexes to replace those that had gone condo.
Then came the recession. With fewer tourists and snowbirds to fill up those rental units, along with evaporating financing to run them, more than a fifth of Orlando’s rental units are now vacant.
“There was supposed to be a need for new rental product to replace what was being taken out of the market,” confirmed Ken Delvillar, director of apartment brokerage services at Cushman & Wakefield, a major real estate developer. Developers “were trying to look ahead of the curve.”
The Orlando apartment market is divided into three major parts — Class A, top-end apartment complexes, Class B, middle-range buildings, and Class C properties. The Class A properties still have occupancy rates nearing 90 percent, and their owners are even considering raising rents. Class B complexes are also mostly full. It is the Class C properties that are bearing the brunt of the vacancy epidemic. Their occupancy rates are around 60 percent.
According to Delvillar, an apartment complex that is only 60-percent occupied may not be making enough in rent to cover its own operating expenses. He cited the example of one Class C complex on the market: Last purchased for $7.5 million, it is now operating in the red and is on the market for only $2.5 million.
Other cities in the top tier of “America’s Emptiest Cities,” according to Forbes, include Las Vegas, Memphis, Tennessee, and Riverside-San Bernardino, California.
Source: Forbes on MSNBC.com, “Orlando, Las Vegas top the list of emptiest U.S. cities,” Daniel Fisher, March 18, 2011