Playing catch-up with the recent run-up in home prices, rents in large apartment complexes posted strong gains across California in the third quarter, according to data to be released today.
Rents rose an average of 6% in most of the state's biggest markets, Novato, Calif.-based research firm RealFacts said. Southern California remained the West's most expensive place to rent, and the San Francisco Bay Area saw the highest rent increases, RealFacts said.
The rental market is likely to tighten further with the state's stable job market attracting more people to move here, although rising rents could slow economic growth, analysts say.
"We have no trouble finding tenants," said Rafael Padilla, a commercial property broker who owns about 35 apartment units in West Los Angeles. "The influx of people is still tremendous. If I lose one tenant, there are three more behind them."
The average rent in Los Angeles and Orange counties rose 7.4% to $1,546 during the third quarter, making the counties the most expensive among 28 Western markets, said RealFacts, which surveyed 12,000 apartment buildings of 100 or more units in 15 states.
Rents increased 7.6% to an average of $1,452 in Ventura County. The Inland Empire is becoming more of a landlord's market as well, with rents in Riverside and San Bernardino counties rising 6% to $1,129.
In Silicon Valley, the average rent jumped 10.4% to $1,450, the first double-digit increase in the high-tech heartland since the end of the dot-com boom in early 2001. Then, Santa Clara County's average rent peaked at $1,959.
For all of Southern California, occupancy rose 0.4 percentage point from a year earlier to 96.2%. RealFacts analyst Chris Bates said occupancy above 96% was generally considered fully occupied -- meaning that renters were having increasing difficulty finding vacancies.
Economists point out that Southland rents are in some ways playing catch-up with the recent run-up in home prices. During the housing boom -- when rock-bottom interest rates made taking on a mortgage as affordable as renting for many people -- landlords had a higher rate of tenant turnover.
Now, the housing boom is over, with the slowdown expected to continue next year, according to a new forecast by the state's real estate agents. The median price of an existing California home will decline 2% to $550,000 in 2007 from a projected median price of $561,000 this year, according to the California Assn. of Realtors. Sales are projected to decline 7% to 447,500 units from 481,200 this year.
