Published May 1, 2003 | May 2003 issue
In July 2000, the Sioux Falls apartment vacancy rate was 2.9 percent. In February 2003, it had climbed to 8.8 percent, its highest level since 1996. The Sioux Falls vacancy jump echoes the national trend, and both local and national housing economists say the slow economy is a major factor. With labor markets weaker and the future uncertain, renters are "doubling up"moving in with roommatesto save money.
But another factor, in Sioux Falls at least, was a significant apartment building boom in 2000 and 2001. Building permits issued in those years were double the figures in the late 1990s, leading to an oversupply of apartment units, according to some local builders.
Low interest rates add two paradoxical quirks to the picture. With historically low mortgage rates available, many renters have opted to buy homes, leading to a drop in demand for apartment rental units. But the same low rates make it easier for construction firms to finance and build new apartment complexes, and some Sioux Falls firms are doing just that. Permits were issued for 133 new units in the first two months of 2003, compared with zero in the first two months a year prior.