APARTMENT FINANCE TODAY • November/December 2008

TULSA, OKLA. - While it may be located in the heart of Tornado Alley, this city has avoided much of the storm that has hit housing markets across the United States in the past couple of years. Employment has grown, and the unemployment rate fell more than a percentage point early in 2008 before creeping back up to 3.8 percent in August. Increased demand for rentals pushed occupancy rates up 2 percentage points to 96 percent in the second quarter and allowed landlords to boost rents 6.3 percent, according to market research firm M/PF YieldStar, which ranks the metro among the nation's top 10 multifamily markets. Meanwhile, declining sales volume hasn't translated into falling prices; average per-unit prices rose 15 percent at mid-year, compared to a year earlier, according to data from Tulsa-based apartment brokerage Commercial Realty Resources Co. The forecast from here on out? Calm winds ahead.

AUSTIN, TEXAS - Apartment builders in the Lone Star State's hottest market are pulling permits left and right and, as of mid-year 2008, were expected to deliver almost 11,500 units by the end of 2009. Absorption has slowed, and the occupancy rate fell to its lowest reading in three years, according to M/PF YieldStar. As a result, Capitol Market Research predicted in June that “year-end occupancy will drop another 2 percent, and rental rates may actually decline.” Things are worst in the luxury market, which registered the metro area's lowest occupancy rate at mid-year, clocking in at 91.7 percent— well behind the overall metro's rate of 93.4 percent. And although rents did increase in the first two quarters of 2008, their growth pace declined markedly, to 3.6 percent, compared to a year earlier, down from a rate between 5 percent and 6 percent in 2007. Maybe it's time for investors to consider hanging their cowboy hats in other Texas cities for a while.

LITTLE ROCK, ARK. - Downtown development has been the spur in the haunches of Arkansas' capital city over the last few years, as wealthy buyers from the suburbs have swooped in to snap up condos and the promise of an urban lifestyle, while apartment developers have lured renters with rehabbed historic buildings. The River Market district is expected to produce more than 60 stories of residential and retail property by December 2009. Limited supply and healthy employment growth—the metro added more than 15,000 jobs in the first nine months of this year—are likely to help push vacancies down and give owners more room to raise rents, which increased at a 5.4 percent annualized rate in the first quarter. The market's expected to trot along at a comfortable pace for quite a while longer.