ResalesWestern Renters Get Reprieve
The apartment market out west stalled during the first quarter this year, extending a longer than expected flat rental market that can"t seem to find enough tenants to justify rental increases.
That means renters can still dicker with landlords and find bargains, concessions and move into higher-end units for less.
The region"s rental market was expected to begin to show more signs of life by now, but the market is mired in an economy with too few jobs, higher energy costs and increased interest rates.
Except for a few locations, rents rose less than one percent from the last quarter 2004 to the first quarter 2005 in most of the 11,000 apartment complexes in the 29 Metropolitan Statistical Areas (MSAs) Novato, CA based RealFacts survey"s each quarter.
RealFacts rents include everything from rental studios to four bedroom town home rentals in its survey and Los Angeles, at 2 percent, had the greatest quarter-to-quarter rent increase, followed by booming Fresno, CA at 1.7 percent; Las Vegas, NV, 1.3 percent; Houston, TX, at 1.1 percent and Riverside, CA at 1.0 percent. More than a third of the MSAs revealed flat or falling rents from quarter-to-quarter.
The year-to-year numbers weren"t much better.
Average rents in Riverside, CA rose 6.6 percent; both in California"s Inland Empire and the Los Angeles/Santa Ana MSA (including Orange County) rents were up by 6 percent; Las Vegas"s rents rose by 5 percent; Fresno County, CA was up by 4.7 percent; Reno, NV was up 3.8 percent; San Diego, CA nearly 3 percent and Oxnard, CA, 2.4 percent.
"In most other locations, rent increases are barely keeping up with the rate of inflation. Although year over year rents have fallen by more than one percent only in Kansas City and Oklahoma City, during the last quarter Boise, ID, Colorado Springs and Denver, CO; Portland, Salt Lake City, Seattle and the San Francisco Bay Area revealed rent declines," said Caroline S. Latham, CEO of RealFacts.
Latham said there were few signs that signaled rental growth is imminent.
"That"s good news for renters and bad news for owners of apartment buildings. More than half of the MSAs for which RealFacts releases data --- 18 out of 30 --- showed a decline in average occupancy since the beginning of 2005. Only five of the MSAs in the survey --- again, Southern California and Las Vegas --- showed occupancy rates of 95 percent or better as of the first quarter of 2005. It is generally assumed that occupancy rates must rise in order to put upward pressure on rents," she said.
Because developers can"t project rents rising faster than inflation, it"s difficult to pursue new development. Most markets already reflect a lower rate of new construction.
"RealFacts has added only 88 newly constructed apartment communities to its database, a total of about 26,000 new units. Most of these are in California --- both Northern and Southern --- and in the Texas cities of Dallas and Houston," Latham said.
Most new construction is in the "luxury" apartment niche of complexes loaded with amenities. Older construction is leaving the market as condo conversions.
"About 110 complexes that were rental units a year ago had to be removed from the RealFacts database because they had been converted to condos," Latham said.
"St. Louis to Seattle, San Diego to Houston, no market was immune to condo conversion. The city that lost the greatest number of rental units, both in absolute numbers and in percentage terms, was Las Vegas, followed by Dallas and then Houston," she added.
Condo conversions offer an exit strategy for hard hit investors and, while the move isn"t directly tied to the flat rental market, some 116,000 rental units in the survey area are built to condo specifications and could easily convert in the future.
If renting is your lifestyle out West, it"s a good time to lock in a long term contract.