Apartment rents on the rise in most Western markets
October 20, 2004
SAN FRANCISCO – Apartment rents through most of the western United States are rising, a sign that landlords are regaining some of the leverage lost in a sluggish economy and a hot home-buying market that lured away tenants, according to a report released Thursday.
Through September, average rents had climbed from the previous year in all but four of the West’s 20 major metropolitan markets surveyed on a quarterly basis by RealFacts, a Novato, Calif.-based research firm.
Rents rose the most in the rapidly growing Southern California market of San Bernardino and Riverside counties, where apartment tenants paid an average of $1,001 in September, a 6.9 percent increase from a year ago. It marked the first time rents have risen above $1,000 in a region known as the “Inland Empire.”
Many of the Inland Empire’s residents have moved there to escape the much higher cost of living closer to the Southern California coast. Los Angeles and Orange counties remain the most expensive metropolitan market, with September rents averaging $1,356, a 4.5 percent increase from last year.
Other strong rental markets included: Ventura County at $1,310, up 3.1 percent; San Diego County at $1,210, up 3.2 percent; Reno, Nev. at $777, up 3.6 percent; Las Vegas at $767, up 2.7 percent; and Fresno County at $697, up 3.9 percent.
The biggest decrease occurred in Santa Clara County, a Silicon Valley hub where rents have plunged by hundreds of dollars during the last 3 1/2 years amid a high-tech slump triggered by the dot-com bust. Santa Clara County rents averaged $1,283 in September, down 1.3 percent.
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But there were even signs of an upturn in Santa Clara County. The average September rent there was $12 higher than in June, marking the region’s first quarter-to-quarter increase since its apartment rents peaked at $1,955 in March 2001, according to RealFacts.
The only other major Western markets where rents declined were: San Francisco/Oakland at $1,310, down 0.8 percent; Boise, Idaho at $695, down 1 percent; and Salt Lake City at $668, down 0.1 percent.
No market outside California had average rents above $1,000. The Seattle metro market – another high-tech haven – was the most expensive non-California market with an average September rent of $874, a 0.6 percent annual increase.
Although modest in most markets, the rental upturn may herald a tipping point for landlords, said RealFacts spokesman Gerald Cox. “Compared to the way things have been going the last few years, this really is quite cheering,” he said.
The tepid economic recovery since the last recession has forced landlords in many markets either to reduce rents or keep rent increases below the inflation rate. People unable to find decent-paying jobs often move in with family or friends to save money – a phenomenon that reduces the pool of potential renters.
The lowest mortgage rates in more than 40 years also have enabled many longtime renters to buy their own homes, another factor that has pressured apartment rents downward, Cox said.
Now that interest rates are slowly beginning to rise, Cox said, more people are likely to remain in their apartments, giving landlords more pricing power.
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