Friday, Aug. 7, 2009 | 3 a.m.
Even apartment buildings aren’t immune to foreclosures.
Las Vegas apartment market analyst Michael Belnick said owners are facing some rough times with 6 percent of the buildings in default or foreclosure. More than 300 notices of default have been issued, he said.
“When markets get this depressed, there are usually opportunities,” Belnick said. “And, yes, there are today and will be for a while.”
Loans for apartment buildings, however, are a challenge and almost all of the deals are cash, Belnick said.
The biggest area to capitalize on is low-end fourplexes. Buyers are paying cash and rehabbing buildings and getting a 15 percent to 20 percent return, he said. The units are being rented because they are in great condition after they are refurbished, he added.
Overall, the economic slowdown and competition from the housing market are taking a toll on apartments. Occupancies dipped to their lowest levels in more than a decade, according to the research firm Applied Analysis. At the same time, average rents fell to where they were three years ago.
Applied Analysis Principal Brian Gordon said a frail job market and price depreciation in the housing market have weakened demand for apartments. Las Vegas’ jobless rate was 12.3 percent in June. The firm said apartment complexes are reporting increasing delinquencies and evictions, a trend that isn’t expected to improve this year.
By the end of June, the valleywide occupancy rate fell to 90.5 percent, down from 93 percent at the end of 2008’s second quarter. Over the past 10 years, the average occupancy rate has been 94.2 percent, according to Applied Analysis.
Gordon said improvement in the apartment market won’t be seen until the leisure and hospitality industries pick up, which won’t happen until the national economy recovers. The slowdown in construction is a problem as well, and it will take much longer for that sector to recover, Gordon said.
Price declines will start to slow by early 2010, he predicted.
The average rent in the second quarter was $857 per unit, down $12 from the first quarter and $34 from 2008’s second quarter, a drop of 3.8 percent.
The highest average rent in the second quarter was $1,010 a month in the southwest valley, while the lowest average was $738 per unit in the northeast valley. Other average rents were: west, $855; central/east, $776; south, $842; northwest, $863; north, $878; and southeast, $970, according to Applied Analysis.
The western valley had the highest occupancy rates at 91.8 percent, while the northwest had the lowest at 88.3 percent, the firm reported.
In the second quarter 171 apartment buildings sold, 38 percent higher than the 124 in the second quarter of 2008, Belnick said. Most sales — 151 — were fourplexes, Belnick said. Of those, 49 percent were repossessions, 45 percent were foreclosure purchases and 6 percent were resales.
The 151 sales are 57 percent higher than the 96 in the second quarter of 2008, he said.
The average price per unit was $42,000, down 41 percent from $70,800 in 2008’s second quarter. Those complexes sold for an average of $100,300 per unit in 2007’s second quarter.
Among complexes of 100 units or more, only two sold in the second quarter, down from nine in the second quarter of 2008, Belnick said. Buyers paid an average of $65,800 per unit, down 24 percent
from $86,500 a unit in 2008’s second quarter.