Return of a pulse to home sales is crimping rents
January 21, 2013
• Rent rate increases taper off or even begin to fall
• A damper on the apartment rental market in most parts of the country
Rents have stopped growing and one research firm points the finger squarely at a return to life of the housing industry.
A more robust for-sale housing market is now emerging — recovering from its coma ever since the subprime mortgage crisis struck down the global economy in 2007, says the firm RealFacts LLC of Novato.
Where there was once a bloated inventory of houses for sale with many homeowners losing homes to foreclosures or opting for a short sale to avoid foreclosure, new listings are now fewer and far between.
RealFacts says this has put a damper on the apartment rental market in most parts of the country.
The national average rent increased by $21 a month. From $1,008 per month to $1,029 per month in the second quarter of 2012, RealFacts says. Then, in the third quarter of 2012, rents increased another $13 per month on average from $1,029 per month to $1,042 per month.
Now the latest figure – from the fourth quarter of 2012 – show that rents have simply stopped growing, down $2 per month from $1,042 per month to $1,040 per month, says RealFacts.
“How we confirm that rents have hit the wall is by examining primary market leaders of the recent past like San Francisco and San Jose. For the past several quarters, those markets leaders have experienced a slight but consistent decrease in occupancy rates, which is an early indicator of rents,” the company’s report says.
RealFacts says the San Jose and San Francisco rental markets appeared to have peaked the fourth quarter of 2012.
With all general trends there are always exceptions, the report says. There are markets where rents are still moving upward, such as Miami, where rent appreciation in the fourth quarter was up $13 per month from $1,260 per month to $1,273 per month.
Greensboro-High Point, N.C., is up $10 per month from $527 per month to $537 per month.
In the Central Valley, Bakersfield is up by $8 per month from $913 per month to $921 per month, an increase of 0.9 percent. But compared to a year earlier, the fourth quarter average rent in Bakersfield was up 4.1 percent.
RealFacts looked at two other Central Valley markets and their Q4 2012 average rents. Fresno’s Q4 2012 average rent was $823, up 1.6 percent over Q4 2011, and Sacramento’s was $958, up 1.1 percent over a year earlier but down 0.5 percent from the previous quarter.
Markets on the decline in 4Q12 are San Jose, down $27 per month from $1,981 per month to $1,954 per month; Baltimore down $18 per month from $1,339 per month to $1,321 per month as is Durham, N.C., from $881 per month to $863 per month. Orlando, Fla., and Denver, Colo., also sustained big losses in the fourth quarter of 2012 at $10 per month and $8 per month respectively.
Occupancy rates show mixed results with half the markets on the rise and half on the decline, RealFacts says.
“We may see increased occupancy in the near future as rents are priced at sustainable levels, or we may see vacancy on the rise if a glut of new construction hits a market all at once,” it says.
The largest increases were found in Baltimore, Md., up 1.0 percent, Las Vegas, Nev., up .08 percent and Seattle, Wash., up .07 percent. Markets posting a decline are Boise, Idaho, down 2.2 percent; Albuquerque, N.M., down 1.4 percent, and Oklahoma City, Okla., down 1.2 percent.
RealFacts says it bases its reports on its tracking of apartment communities of 100 or more units, except in urban core markets like San Francisco and Los Angeles where they go down to 50+. They exclude affordable, senior and student housing for those communities where market rent units don't equal or exceed 100+. They say they include all Class A, B and C product.