Despite headline news speaking to the adverse consequences of the U.S. government shutdown, the first in seventeen years, the rental market seems insulated from possible demise. With all arrows pointing to rent decline, such as rents set so high as to price out the working class citizen – the majority of residents seeking housing require a reasonably priced option.
Rental Growth
With the average rent north of $2,000 per month in the San Francisco Bay Area, this equates to an entire month’s take home paycheck for most people. This reality juxtaposed to another reality – a demand for highly skilled labor in the tech sector. As of the third quarter, there are many new jobs being created and companies are scouring the globe to import the best talent to fill them.
The recent RealFacts report shows average rents nationwide have increased by $17 per month from $1,075 per month to $1,092 per month. The largest gains were in Northern California markets where the tech jobs are still rapidly expanding. San Francisco had the largest rental increase this quarter of $72 per month. from $1,971 to $2,043. That was followed by Santa Rosa CA, up $71 per month from $1,336 per month to $1,407 per month. Santa Cruz rents increased by $68 per month from $1,743 per month to $1,811 per month.
In Southern California, Ventura increased by $43 per month and the Los Angeles MSA increased by $42 per month. We predict Southern California has some catching up to do and that rents will climb further, well into 2014.
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3rd Quarter 2013 California Rents |
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| Metropolitan Statistical Area |
Avg Rent |
Qtrly Avg Rent |
Yr/Yr Rent Increase |
|
|
|
|
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| Bakersfield CA |
$933 |
0.6% from $927 |
3.6% from $901 |
| Fresno CA |
$817 |
-0.1% from $818 |
0.1% from $816 |
| Los Angeles-Long Beach – Santa Ana |
$1,727 |
1.5% from $1,702 |
3.2% from $1,673 |
| Oxnard-Thousand Oaks – Ventura |
$1,554 |
2.1% from $1,522 |
3.5% from $1,502 |
| Riverside-San Bernardino – Ontario |
$1,125 |
1.3% from $1,111 |
2.1% from $1,102 |
| San Diego-Carlsbad – San Marcos |
$1,510 |
2.8% from $1,469 |
4.2% from $1,449 |
| San Francisco-Oakland – Fremont |
$1,971 |
4.4% from $1,888 |
8.9% from $1,810 |
| San Jose-Sunnyvale – Santa Clara |
$2,128 |
6.7% from $1,994 |
8.4% from $1,964 |
| Santa Cruz-Watsonville |
$1,743 |
2.2% from $1,705 |
5.8% from $1,648 |
| Santa Rosa-Petaluma |
$1,335 |
2.1% from $1,307 |
6.7% from $1,251 |
| Vallejo-Fairfield |
$1,149 |
1.4% from $1,133 |
1.3% from $1,134 |
RealFacts, LLC.
Occupancy Rates
Occupancy rates are holding steady with no increase or decrease realized on a national level. Markets that are experiencing an increase are Boise, up 3.4% from 94.2% to 97.40% and Greensboro, NC, up 3.8% from 90.5% to 94.30% suggesting these markets may hold up well to new construction. Sacramento, California seems ripe for new development too. Its occupancy rate climbed from 93% to 95.1%. Santa Cruz which has experienced rising rents and increased occupancy may not be a great candidate for new construction of rental housing as its current occupancy stands at just 92%, up 1.8% from 90.4%. This has been widely dependent on students to fill up its units. However, more recently, the Silicon Valley has been bussing in workers from this seaside community and the demographic of the renters here is evolving into that of tech employees. Developers may want to keep an eye on this emerging trend.
New Construction
RealFacts has been diligently tracking new construction and with the publication of third quarter data we found the majority of new units built so far in 2013 are located in California, Washington and Colorado.
On a national level, rents on average for new construction (built in 2013) are $1,832 per month compared to all housing at $1,092 per month. The market with the most new units so far is California with 7,526 units added in 2013. The average rent for new communities added in 2013 is $2,468 per month. and $2.73/sq. ft. which is far above any other market bringing new units to its inventory that RealFacts tracks. Second is Washington at 2,756 new units, with an average rent of $1,500 per month. and $1.83/sq. ft. The third largest market to add new units is Colorado, also at $1,500 per month. average rents or $1.71/mo. In every market, the majority of new units built are 1BR/1BA and 2BR/2BA.
Sarah Bridge is Founder and Managing Member of RealFacts, LLC. RealFacts has published data for the multi-family housing community since 1989 and surveys every community each quarter for current rent and occupancy levels. For more information or to see the full Third Quarter 2013 MSA Synopsis, please visit www.realfacts.com.