Rents Climb in Vacancy Squeeze Linked to Foreclosures

Sunday, September 28, 2008
Roger Showley
SignOnSanDiego.com

Apartment rents in the county increased 2.49 percent in the last six
months while vacancies decreased 1.38 percentage points as homeowners
lost their properties to foreclosures and renters found themselves
unable to buy.

MarketPointe Realty Advisors said in its semiannual survey of 804
large apartment complexes with a total of 115,576 units that the
average rent this month stood at $1,344, up from $1,312 in the March
survey and $1,291 last September.

MarketPointe President Russ Valone said the rental increase was the largest in recent years and likely to increase further.

“It will move out a little more if we continue to see really tough economic times,” Valone said.

The vacancy rate dropped to 2.25 percent after rising from 2.58 percent a year ago to 3.63 percent last spring.

Valone said the figure does not include individual homes and
apartments that were foreclosed and rerented by new owners and
investors. But he estimated that the overall rental vacancy rate
countywide is somewhere between 2.25 percent and 4.4 percent, the
figure published by the state early this year that reflects all
rentals, not just large complexes owned by companies, partnerships and
institutional investors.

He said the rental market is strong, from the landlord's perspective,
because of would-be buyers remaining in apartments until home prices
and mortgage availability stabilize; former owners moving into rentals
when they lose their homes; tenants relocating because their landlords
lost the units to foreclosure; and buyers of foreclosure and short-sale
homes – those sold for less than the loan value – fixing them up and
putting them back into the rental pool.

But he said an apartment shortage is unlikely.

“Is the rental market becoming so tight,” Valone said, “that we
will end up with households being homeless because they can't find a
place to rent? I don't think we're at that condition yet.”

He said developers are planning to build new apartments rather
than condo projects because financing is easier, but that those units
might only rent for a couple of years before they convert to condo
status if buying conditions improve.

 

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