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Once upon a time, it might have been easier to buy a quarter-million dollar home than to rent an apartment. Around the middle of the last decade, the combination of ridiculously low lending standards and high demand for rented housing meant that apartment vacancies were low, and landlords could command top dollar for their properties. But oh, how the times have changed. News broke today in the Wall Street Journal that apartment vacancies had hit a thirty-year record at the end of last year and that landlords from coast to coast are having to hustle to keep their existing tenants, let alone attracting new ones from a pool of potential renters that barely exists anymore.

Back in 1970, the New York-based research firm Reis Inc. began tracking rent rates and vacancies across the topmost eighty rental markets in the country. During the fourth quarter of 2009, U.S. vacancy rates hit an average of eight percent – the highest since Reis has been in the business. Overall, rents fell three percent last year. The biggest drop-offs were seen in cities that had really boomed before the current recession: San Jose, Seattle, et cetera. The markets that saw the worst impact from this trend were: Lexington, KY, Tucson, AZ, and Charlotte, NC. In New York City, home to some of the steepest rents in the entire country, vacancies were minutely up in Q4 2009 for the second quarter running, but approximately sixty percent of all rental buildings had dropped their rents in the last three months of the year. In terms of effective rent – the rental rates calculated on the basis of all promotions like free months of rent and decreased rent for the first three months – NYC’s rents fell by over five and a half percent last year, the worst in Reis’s history.

For renters, none of this is necessarily bad since it means that they now hold the power when negotiating with their landlords. Landlords are having to become accustomed to enticing their tenants, say industry experts. Pained accent walls, free carpet shampooing, and perks like gym memberships, Starbucks cards, and/or free cable are all becoming virtual requirements as tenants play prospective landlords off one another. Landlords are reporting having to lower lease criteria and make many concessions to both keep their current tenants and lure new ones in. Many people who already have an apartment are finding themselves in the enviable position of being able to negotiate much more attractive lease terms when their rent comes up during the year. Those who own rental properties have pretty much no other choices, given that all evidence points to the first six months of 2010 being “pretty ugly.”

Rising unemployment has been the primary bugaboo affecting apartment vacancies in many places, say analysts. There has been a definite trend towards would-be renters either doubling up with roommates or friends, and many have had to go back home to live with family members after having been squeezed out of a job. Those younger Americans who are more likely to rent than any other age group have experienced the lion’s share of job losses, which has made a huge dent in the numbers. Landlords are also having to deal with the reality of greatly increased competition. Some one hundred twenty thousand rental units entered the national market last year, the bulk of which were failed condo projects that were converted to rentals when the units failed to sell. Places like Florida and Nevada, where the oversupply is really abundant and pitiful, have seen the biggest losses from this particular problem in recent months. Of course, many of these “busted” condo projects obtained financing before the banking crash. It’s MUCH harder for real estate ventures to get financed these days, which means that the new apartment market is scheduled to come to a crashing halt sometime around 2011. If nothing else, apartment owners might be able to capitalize on the limited new supply at this point to somehow turn the trend around.

There are currently also many incentives for first-time homebuyers looking to break into the market. Some of these buyers would have been renting, were buying not made so attractive. Further losses in the rental market happened here. Informal surveys have found many landlords nationwide reporting their tenants moving out and into homes. That rate is still only marginal compared with the height of the housing boom, but marks an increase from the darkest days of the recession and real estate industry in this country. The Wall Street Journal Article cited plummeting home prices and record low mortgage rates and the two major reasons why, in many cases, it now costs less to own than it has in the past decade on a mortgage-payment-to-rent basis. On the other hand, however, rent rates taking a nosedive in the past three months are expected to offset some of the recent improvements in the affordability of home prices, making renting more attractive than owning in some key geographic areas.

It’s expected that apartment leases will fall by another two or three percent in the new year before the trend even starts to reverse itself.