正文
Bay Area rents succumbed to growing economic pressures during the fourth quarter, dipping for the first time in years and upending the balance of power between tenants and landlords, according to a report by Novato research firm RealFacts Inc.
Apartment prices have climbed inexorably since 2004, stubbornly defying the broader residential real estate downturn that began three years ago. In fact, as the housing market tanked, it sent foreclosed owners back to apartment living and eliminated financing options for would-be buyers, pushing up rental rates quarter after quarter.
During the last three months of 2008, however, the streak ended. In the San Francisco metropolitan area (Alameda, Contra Costa, Marin, San Francisco and San Mateo counties), the average rent stood at $1,624, down 0.8 percent from the prior quarter, as occupancy fell 0.7 percent to 95.4 percent.
The story was starker for the San Jose area (Santa Clara and San Benito counties), with rents down 2 percent to $1,674 and occupancy down 0.8 percent to 94.8 percent. For the first time since the dot-com bust, that average rate has actually gone down, said Caroline Latham, owner of RealFacts, adding that rents have climbed between 5 and 10 percent every year in the Bay Area since 2004. That\'s a big change, and I think there\'s a big shift going on.
Prices were still up slightly on a year-over-year basis, at 3 percent and 1.6 percent, respectively.
She attributes the quarterly decline to the weakening economy and growing unemployment rate, which are discouraging people from making moves, whether fleeing the family coop, leaving behind roommates or upgrading to larger apartments. Other industry observers note that a flurry of investors have bought foreclosed homes and turned them into rentals even as many new condos hitting the market have been switched to apartments, collectively increasing the regional rental stock.
A survey of large apartment owners by the National Multi Housing Council released earlier this month mirrored the RealFacts data. The Washington trade group\'s market tightness index, which measures changes in occupancy rates and rents, fell from 24 to 11. It was the sixth straight quarter that the index was below 50, a reading that indicates conditions are worsening.
Once again, apartment firms are facing tough market conditions not of their making, said Mark Obrinsky, the trade group\'s chief economist, in a prepared statement. Earlier in the decade, the bubble-induced rise in homeownership eroded apartment demand. Now the economic and financial collapse caused by the bursting of that bubble is taking a toll.
That toll, of course, is good news for tenants, who have stood by helplessly as rents and demand for choice apartments surged in recent years. Now the competition is intensifying among landlords, with some already offering things like $99 move-in specials and free credit checks to would-be tenants, Latham said.
I think we\'ll see more of that competition for tenants, so (landlords) better know how to manage it and give tenants the service and value they think they\'re paying for, she said.
Falling prices for rental units could depress purchases of single and multifamily properties among investors looking to lease them, which has proven to be one of the biggest areas of demand in the markets hit hardest by foreclosures, chipping away at inventory levels.
Nationally, the average rent fell below $1,000, from $1,002 at the end of the third quarter to $993 in the fourth. Occupancy declined from 92.9 percent to 92.2 percent during that time, RealFacts reported.
In the Bay Area, RealFacts surveys professionally managed apartment complexes with 50 or more units. The average figures incorporate everything from lofts to four-bedroom units.
Tenants take the driver\'s seat
Some experts see a 180-degree shift in the Bay Area rental market. For the first time in four years, apartment rents have decreased in the San Francisco and San Jose metropolitan areas.
Apartment prices have climbed inexorably since 2004, stubbornly defying the broader residential real estate downturn that began three years ago. In fact, as the housing market tanked, it sent foreclosed owners back to apartment living and eliminated financing options for would-be buyers, pushing up rental rates quarter after quarter.
During the last three months of 2008, however, the streak ended. In the San Francisco metropolitan area (Alameda, Contra Costa, Marin, San Francisco and San Mateo counties), the average rent stood at $1,624, down 0.8 percent from the prior quarter, as occupancy fell 0.7 percent to 95.4 percent.
The story was starker for the San Jose area (Santa Clara and San Benito counties), with rents down 2 percent to $1,674 and occupancy down 0.8 percent to 94.8 percent. For the first time since the dot-com bust, that average rate has actually gone down, said Caroline Latham, owner of RealFacts, adding that rents have climbed between 5 and 10 percent every year in the Bay Area since 2004. That\'s a big change, and I think there\'s a big shift going on.
Prices were still up slightly on a year-over-year basis, at 3 percent and 1.6 percent, respectively.
She attributes the quarterly decline to the weakening economy and growing unemployment rate, which are discouraging people from making moves, whether fleeing the family coop, leaving behind roommates or upgrading to larger apartments. Other industry observers note that a flurry of investors have bought foreclosed homes and turned them into rentals even as many new condos hitting the market have been switched to apartments, collectively increasing the regional rental stock.
A survey of large apartment owners by the National Multi Housing Council released earlier this month mirrored the RealFacts data. The Washington trade group\'s market tightness index, which measures changes in occupancy rates and rents, fell from 24 to 11. It was the sixth straight quarter that the index was below 50, a reading that indicates conditions are worsening.
Once again, apartment firms are facing tough market conditions not of their making, said Mark Obrinsky, the trade group\'s chief economist, in a prepared statement. Earlier in the decade, the bubble-induced rise in homeownership eroded apartment demand. Now the economic and financial collapse caused by the bursting of that bubble is taking a toll.
That toll, of course, is good news for tenants, who have stood by helplessly as rents and demand for choice apartments surged in recent years. Now the competition is intensifying among landlords, with some already offering things like $99 move-in specials and free credit checks to would-be tenants, Latham said.
I think we\'ll see more of that competition for tenants, so (landlords) better know how to manage it and give tenants the service and value they think they\'re paying for, she said.
Falling prices for rental units could depress purchases of single and multifamily properties among investors looking to lease them, which has proven to be one of the biggest areas of demand in the markets hit hardest by foreclosures, chipping away at inventory levels.
Nationally, the average rent fell below $1,000, from $1,002 at the end of the third quarter to $993 in the fourth. Occupancy declined from 92.9 percent to 92.2 percent during that time, RealFacts reported.
In the Bay Area, RealFacts surveys professionally managed apartment complexes with 50 or more units. The average figures incorporate everything from lofts to four-bedroom units.
Tenants take the driver\'s seat
Some experts see a 180-degree shift in the Bay Area rental market. For the first time in four years, apartment rents have decreased in the San Francisco and San Jose metropolitan areas.
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