Despite foreclosures, rents hold steady

NOVATO
November 13, 2007 5:40am

Apartment rental rates held steady in the third quarter, despite people being forced out of their homes by foreclosures, says RealFacts, a Novato-based database publisher specializing in the multifamily housing market.

Even in the Central Valley’s San Joaquin County, which has seen one of the nation’s highest per capita default and foreclosure rates, rents have increased just 2.6 percent year-over-year, with occupancy rates essentially unchanged, says RealFacts.

One straw in the wind might be an increase in rents for two-bedroom/two-bath apartments of 4.6 percent over the past year, the company says.

But similar rate increases are seen in other areas of the West, it says.

In Las Vegas, another relatively high foreclosure location, rent increases were also just 2.5 percent, and “2X2” units went up 3.1 percent. In Phoenix, occupancy was unchanged, rents went up by 2.65 percent, “and the only excitement was in studio units, which rocketed up by 6 percent over the past year,” says RealFacts.

“So our conclusion is that there has been no effect on the rental market,” says Caroline Latham, chief executive officer of RealFacts.

“This finding is not so surprising when you stop to think that many of the new condos and houses in subdivisions that were purchased in the past several years were not bought as dwellings but as speculative investments,” she says. “Buyers hope to hold the properties for 18 to 24 months and then sell for 25 percent to 40 percent profit. They never intended to live in the units and didn’t want to become landlords, so the houses were not effectively dwelling units; they were only an investment product.”

Some estimates put this motive for investment in the housing market as high as one-third to one-half of all purchases, Ms. Latham says.