Western rents rise as home prices fall
Vail, CO Colorado
SAN FRANCISCO ” Apartment rents throughout the western United States climbed last year while home prices crumbled in many markets, a contrast apparently driven by the growing number of people who don’t want or can’t qualify to buy a house.
The average cost of renting an apartment rose in all 20 major Western metropolitan markets covered in a quarterly survey to be released Thursday by real estate research firm RealFacts Inc.
In many cases, last year’s rent increases were well above the inflation rate. Apartment dwellers in the San Francisco Bay area, Salt Lake City and Seattle were all particularly hard hit as their average rents rose between 8.6 percent and 10.8 percent during 2007, RealFacts said.
Rents in Portland and the Los Angeles area also increased by at least 5 percent.
The changes were less dramatic in most other Western markets, with rent increases ranging from 1.4 percent to 4.4 percent.
Meanwhile, home prices are plunging. For instance, a mid-priced home in Los Angeles County sold for $470,000 last month, a 10.5 percent drop from the end of 2006, according to another real estate research firm, DataQuick Information Systems.
While the reasons for the higher rents are difficult to pinpoint, a sharp downturn in the number of people buying homes appears to be a contributing factor.
As lenders have become more cautious while wrestling with huge losses from past loans to borrowers with blemished credit problems, fewer people can qualify for the financing to buy the home.
And anecdotal evidence suggests prospective buyers who can still get a mortgage are holding off in hopes that they can get an ever better deal if real estate prices continue to decline as many economists anticipate.
Fewer home buyers typically translates into more people trying to lease their living space ” a supply-and-demand dynamic that works in the favor of apartment landlords.
The abundance of high-paying jobs in high-tech havens like Silicon Valley and Seattle also are propelling rents as more people move into those markets to work.
In some instances, the higher rents are taking a substantial bite out of people’s paychecks, especially in places like Silicon Valley. By the end of 2007, renters there were paying an average of $160 more per month for an apartment than at the start of the year. That translated into a nearly $2,000 annual increase.
The financial shock wasn’t as jarring in Salt Lake City, where paying for the 10.7 percent rise in average rents there cost $76 more per month, or $912 annually.
After a 10.8 percent increase in 2007, Silicon Valley’s average rent stood at $1,647, tying the region with the two-county market defined by Los Angeles and Orange counties as the most expensive places in the West to rent an apartment.
The West’s least expensive apartment rental market remained Tucson, Ariz., where the monthly cost edged up 2.9 percent to $665.
If the economy continues to falter as it has in recent months, apartment rents will be more likely to droop.
The sluggish economy already appears to be slowing the pace of rent increases in places like California’s Central Valley, where rents ended December largely unchanged from September levels. That inland section of California has been among the nation’s hardest hit by the mortgage meltdown as lenders seize hundreds of homes from borrowers who aren’t repaying their loans.
Apartment rent increases also leveled off in Colorado and Nevada during the final three months of 2007.
Support Local Journalism
If you don't follow the rules, your comment may be deleted.
User Legend: Moderator Trusted User