After sliding since late 2008, apartment rents climbed in the first quarter of this year in Santa Clara and San Mateo counties — the latest sign that the region’s economy is stabilizing.
The average monthly rent for all types of apartments in large complexes climbed to $1,510 in Santa Clara County, up nearly 2 percent from $1,482 in the fourth quarter of 2009, according to a report from RealFacts. The company, which tracks rents and occupancy rates in apartment complexes of at least 50 units, said San Mateo County’s average rent inched up to $1,636 from $1,628, an increase of half a percent.
Despite the slight increases, rents are still lower than in the first quarter of 2009, when Santa Clara County’s average was $1,613, and San Mateo County’s was $1,741.
In the Bay Area and across the country, rents peaked in the third quarter of 2008, then fell as unemployment deepened.
“What’s been affecting rents and occupancy is really the economic climate that’s affecting the entire country,” said Sarah Bridge, owner of RealFacts, which is based in Marin County. With modest improvements in the economy and job creation, she said, demand for apartments has increased and rents have followed — modestly.
“My guess is we’re not going to go back down,” she said, referring to the uptick in Silicon Valley and Peninsula rents after five quarters of decline. “We’ll either level off, or there will be a continued increase in asking rents and occupancy.”
Bridge said renting a unit in a large complex is more attractive to some renters now because the move-in costs can be less than when renting from a small landlord. Property managers at large complexes will cut back on the usual security deposit to help fill up their buildings, but smaller landlords often can’t take that risk, and still require hefty deposits. At a time when many people don’t have a lot of cash on hand, she said, “some people will just say, ‘Hey, I’ll take the $99 move-in special, thank you’,” even though they might otherwise prefer renting a house.
But West San Jose resident Kapil Sethi, who has been looking for a new place to rent for about six weeks, said he has not seen many large landlords offer such incentives these days, at least in the West Valley neighborhoods he’s focusing on. He and his family have toured units in large complexes as well as single-family houses, which is what Sethi said he prefers to rent. Not only has he noticed that rents have begun to rise in the well-appointed apartment complexes, but “goodies like the first month free, that’s also stopped,” he said. “Last year there were plenty of them.”
Rents for houses in the neighborhoods he likes have not increased, he said. Right now he’s paying $2,000 a month, having talked his landlord down from $2,200 last summer. Now one of the landlord’s relatives is moving in, and Sethi and his wife and kids need to move. Sethi said he thinks he’ll be able to find a three-bedroom place with a nice backyard for $2,000 or so now.
“I think it’s still a buyer’s market,” he said. “The market is warming up, but there are still plenty of homes available.”
Economist Matthew Anderson of Foresight Analytics in Oakland called the increases in rent and occupancy positive signs for Silicon Valley and the Bay Area economy in general. But he cautioned against pinning too much hope on an indicator like rising rents.
The rate of occupancy also increased locally in the first quarter, according to RealFacts. Large complexes in Santa Clara County were 95.5 percent occupied last quarter, up from 94.7 percent in the fourth quarter of 2009. In San Mateo, the occupancy rate went from 94.6 percent to 95.2 percent. Landlords generally believe they can raise rents when their properties are at least 95 percent full. The recent peak for occupancy in both counties was in the first half of 2008, at 96.5 percent.
Rents in Los Angeles/Long Beach/Santa Ana, with an average monthly rent of $1,536, were the most expensive of the 41 metropolitan areas nationwide surveyed by RealFacts. The San Jose and San Francisco metro areas tied for second with average monthly rents of $1,513. (The San Jose metro area includes Santa Clara and San Benito counties; the San Francisco area includes San Francisco, San Mateo, Marin, Alameda and Contra Costa counties.)
By Sue McAllister of Mercury News