According to her Salem/Keizer Apartment Survey Winter 2007, Shirley Layne, a Certified General Appraiser with Powell Valuation Inc. in Salem, Oregon, suggests that apartment units are experiencing favorable vacancy rates and rents, and less-favorable cap rates than they did in 2006.

Here are some highlights from her survey for 293 rental property complexes consisting of 15,322 units in the Salem and Keizer Oregon area.

APARTMENT VACANCY - The Salem area vacancy rate has seen a significant decrease to its lowest level in seven years for rental property. Diminishing land supply due to a restrictive Urban Growth Boundary, coupled with little new apartment construction has pushed vacancy rates down to an average of 3.23%

APARTMENT RENT - The average rent increase over the past year was 3.89% or approximately $22. This is the largest percentage increase in rent rates since fall 2005 and a net increase of just 1% over the prior two years. With minimal new unit construction in the Salem-Keizer market, rents are once again on the rise, with two bedroom/two bath units in the highest demand and generally inflating at a steady rate of 5.0% per year.

CAP RATES are back on the rise. After a low of 6.25% for “new units” (constructed after 1990) and 6.81% for “mature units” (built prior to 1990) the apartment market has slowed leaving more sustainable rates for both mature and new units. New units are currently selling for an average cap rate of 6.62% and $73,462 per unit, while older units are holding steady at just under a 7.0% cap rate and $43,876.

According to the survey, cap rates are likely to continue to climb through 2007 following the recent trend of interest rate increases for mortgage loans, aggressive rent inflation resulting from falling vacancy rates, and a strengthening minimum wage.

You can access previous surveys of the Salem-Keizer apartment market at http://www.powellvaluation.com.

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