Friday, April 24, 2009

Bay Area Housing Rents Decline

The Contra Costa Times reports Bay Area rents decline, fueled by unemployment

…the average asking rent in the nine-county Bay Area during the first quarter for apartment buildings with 50 or more units was $1,556, or a 1.4 percent drop from a year ago, said a report released Thursday by Novato-based RealFacts.

The occupancy rate fell 1.7 percent to 94.2 percent. The average rent applies to all rental units, ranging from studios to three-bedroom townhouses.

The loss of jobs - or the fear of losing jobs - is leading to lower occupancy rates that push down rents.

"The main factor is employment. Every time someone loses a job, or is afraid of losing a job, an individual makes a decision about what to do. And a certain number of people stop renting," said Caroline Latham, chief executive officer of RealFacts, a provider of rental data.

Stop renting and do what? Buy? With sales falling and rental occupancy rates falling, we have to ask the question: where are all of the people going? I’ve heard stories of foreign laborers going back home because there is no more work here…that could account for some of it. We’ve also heard of “doubling-up” as more families and friends share their homes to save money.

What about the story we were told for so many years about California’s housing shortage? Clearly, that was more sales-pitch than reality and now we simply have too many housing units.

While rents went down slightly overall in the Bay Area, that was not the case in every county. In Alameda County, average rents edged up 0.6 percent to $1,427 while the occupancy rate fell 2.8 percent to 92.9 percent. In Solano County, rents edged up 1.3 percent to $1,168 on a year-to-year basis while the occupancy rate fell 1.3 percent to 93.9 percent.

In Contra Costa County, year-to-year average rents dropped 1.8 percent to $1,276 while occupancy rates fell 2.1 percent to 93.5 percent. San Mateo County saw rents fall 1.9 percent to $1,741 while occupancy rates declined 0.2 percent to 96 percent In San Joaquin County, rents fell 2.2 percent to $862 while occupancy rates dipped 2.1 percent to 93.2 percent.

The biggest losers here are the investors that have purchased homes that “cash-flow.”  As rents continue to fall, so will cap rates, pushing depressed home prices down even more.