Multifamily still rockin' and rollin' at RealShare Apartments 2012

By Erika Petty
October 30, 2012

Last week’s RealShare Apartments conference in Los Angeles was the place to be for multifamily investors, lenders and brokers.  With almost 2,000 attendees, this was one of the best turnouts ever.  Enthusiasm continues to be high for multifamily properties, despite signs of a returning single-family housing market.  For example, while rent hikes could drive some of the best renters into home ownership, financing for homes is still a challenge as credit requirements are high so this will help sustain apartment demand.

The environmental and engineering due diligence industry has a unique “boots on the ground” perspective on the trends in the multifamily and commercial real estate markets.  Our services, such as a Property Condition Report and Phase I Environmental Site Assessment, are typically called into play prior to acquisition or financing, so we can serve as a metric for what is going on in the market.  A few trends we’ve seen lately include:  large portfolios in the 2^nd half of 2012; foreign and institutional investor activity in major markets like NYC and LA; REITs leading the way into secondary markets with others following; very active HUD lenders across the country; and of course busy Fannie Mae and Freddie Mac lenders as well.

Partner’s president Joe Derhake, PE noted some of these and other trends in an interview with GlobeStreet TV during RealShare, and they were also echoed by other panelists throughout the day.

The sentiment at RealShare Apartments seemed to be that 2013 will be another great year for multifamily, though one panelist noted that the best buying opportunities will be done by this spring.  We look forward to a busy 1^st quarter for multifamily due diligence, and hopefully a sustained demand throughout the year.

Source:  GlobeSt

Housing Prices and Income Inequality

By BINYAMIN APPELBAUM
October 17, 2012 

Why is the gap between rich and poor in America yawning ever wider?

The issue is urgent. As my colleague Annie Lowrey writes, there is growing evidence that income inequality impedes economic growth.

And one interesting explanation boils down to the high price of housing.

A recent paper by researchers at Harvard University argues that the prohibitive cost of living in the areas with the greatest economic opportunities has forced low-wage workers to migrate instead to areas with inferior opportunities.

“The best places for low- and high-skilled workers used to be the same places: California, Maryland, New York,” said Peter Ganong, a doctoral student in economics, who wrote the paper with Daniel Shoag, a professor of public policy. “Now low-skilled workers can no longer afford to move to the high-wage places.” 

In this account, people aren’t moving to the Sun Belt because they want to live there. They are moving because they can’t afford to live in Boston. And the result isn’t just second-best for them; it also slows the pace of economic growth.

Basically, the economy works best when people can move where their skills are most valued. But for low-skill workers, the high price of housing means the cost of living in those places often exceeds the benefits of working there.
The trends are beautifully illustrated by three time-lapse graphics.

The first shows that average incomes by state converged between 1880 and 1980 as low-skilled workers moved to wealthier states. The second shows the pattern of migration, which has changed significantly over the last 30 years.
The third shows the increase in land-use regulations in rich states.

And here’s the crucial point: It doesn’t have to be this way. High housing prices are the result of public policies that discourage new development. Those policies are generally embraced by the residents of wealthy areas, who benefit, at least in the short term, from restrictions on the supply of new housing. But this paper is one more reason to worry about the long-term economic consequences.

Source: Economix Blog The New York Times

UCLA: Housing recovery will not come in '12

By Lily Leung

June 20, 2012

Work continues at the Carmel Pacific Ridge Apartments in Linda Vista. The multi-family market is on a roll and is expected to get hotter in 2013, according to an economic report from UCLA. — Howard Lipin / U-T San Diego staff

Home sales are hot and the labor market continues to see steady gains, but could positive indicators like these be too good to be true, possibly a mirage?

That's what economists at UCLA concluded in their 2012 economic forecast for California and the nation, which was released Wednesday. 

After poring over facts and figures, they found that while key numbers appear encouraging, a housing recovery in California likely won't come in 2012. It'll be more like 2013 or 2014.

Here are five key takeaways from the report's authors that support this argument:

--Homeownership will continue to fall. The rate of people owning homes peaked at 69 percent eight years ago. It will likely dip to 65 percent by year's end. Logically, if fewer folks are owning, then more will rent. The multi-family sector, which is hot now, is expected to grow hotter because household formations are expected to rise. The UCLA report predicts household formations will grow at "a robust 1.70 million run rate in 2013-14," up from a meager 327,000 in 2009. "Simply put there are too many young adults living in their parent’s homes, an untenable situation for all of the parties involved," the report said.

--Student debt has become unwieldy. National student debt is estimated at $1 trillion, and the consequences of that load on the economy could be explosive, according to Wednesday's findings. More 20 and 30 somethings are expected to move out of Mom and Dad's place, but what they owe in student loans could keep them from being homeowners. "And because student loan debt is not extinguishable in bankruptcy, it will impair the ability of younger people to buy homes in the years to come," economists said.

--Rentals as sound investments: More investors seeking higher yields are buying up apartments to satisfy that need. With Treasury notes, you'll expect a 2 percent return. With rentals, it's about 4 percent to 5 percent, according to the UCLA study. But what makes the investment sweeter is the high possibility of rent hikes, which increases returns. But a delicate balance must be struck, researchers said. Landlords could justify increases in rent because of low vacancy rates and higher demand, but increases that are too high could push some qualified would-be borrowers to buy.

The conclusion: UCLA's economists say the California economy so far this year continues to be shaky but will be likely be in recovery mode in the next two years. "While this news is a near-term downer, we are expecting 2013 and 2014 to be years in which the California housing market grows more rapidly than the U.S.," the report says. 

Source: UT San Diego 

HOUSING: North County vacancy rate rises

By Eric Wolff

June 11, 2012

The Latitude 33 apartment complex is under construction on Escondido Boulevard in Escondido. HAYNE PALMOUR IV 

The vacancy rate in North County apartments climbed in the spring, and rents dropped countywide, according to a report from the San Diego County Apartment Association.

The trend reflects the addition of newly built apartments in North County and the increase in gas prices as commuters move closer to jobs in downtown San Diego, said Alan Pentico, executive director of the association.

"What we see with that is gas prices and people are moving into the core area," Pentico said. "We (did) this survey back in March, when prices were high."

Indeed, the price of a gallon of unleaded gasoline crested in March at $4.38 in both San Diego and Riverside counties, though both prices have dropped in recent weeks, according to AAA.

The apartment vacancy rate in North County hit 4.9 percent in the association's survey, up from 4.3 percent in the fall survey and 4 percent in spring 2011.

North County vacancy rates may be rising in part because of new projects opening, Pentico said. Certainly there's plenty of apartment construction under way: New projects in Escondido and San Marcos expect to open later this year.
The city of San Diego's vacancy rate moved in the opposite direction, falling from 4.1 percent in 2011 to 3.8 percent in the most recent survey.

The association doesn't break out rent for North County, but the average rent for a two-bedroom apartment in San Diego County fell from $1,338 a month in spring 2011 to $1,309 in the most recent survey.

The association's survey doesn't cover Southwest Riverside County, but the association recently expanded to include landlords in that area. Pentico said he suspects the vacancy rate there hasn't changed much and remains high.

"They're still experiencing the higher per-unit occupancy; they're still seeing what we're moving away from now," he said.

As foreclosures pushed people out of their houses in the mid-2000s, many moved in with family members. The average household size in Southwest County increased 12 percent between 2000 and 2010 to 3.05 per household, according to the U.S. Census Bureau.

Households typically grow or shrink slowly, and a double-digit change is dramatic, Beth Jarosz, a senior demographer with the San Diego Association of Governments, said in an interview last year.

North County household size increased 1 percent to 2.82 people per household over the same 10-year period.

Source: North County Times 

Rental vacancy up slightly, report says

Written by Lily Leung

June 11, 2012

After completion, Carmel Pacific Ridge in Linda Vista will have 533 units, ranging from $1,500 to $4,000. Amenities include two resort-style pool and spa areas, an outdoor yoga area and gourmet test kitchen. The first wave of units will be available in July. The project is expected to be done by May 2013. — Howard Lipin

The share of unoccupied rentals in San Diego County is up slightly from the fall, based on a report released Monday from the San Diego County Apartment Association.

The spring vacancy rate is 4.5 percent, increasing from 4.3 percent in the fall. For context, the post-recession high was 5.4 percent in spring 2009, while the post-recession low was 3.6 percent in fall 2008.

What does the recent increase mean for the local rental market?

"This slight shift suggests that rental units remain in high demand and are inching toward more traditional levels," according to the twice-yearly survey.

The report also found that: 

--The East County had the highest share of unoccupied rentals at 5.6 percent. North County came in next at 4.9 percent. San Diego city had the lowest, at 3.4 percent. 

--Reported rent changes are mixed, when comparing the spring to the fall. According to weighted averages, studios in the spring were $910; one-bedroom, $1,068; two-bedrooms $1,309; three or more bedrooms, $1,677. In the fall, they were $899; $1,090; $1,418; and $1,730. 

The survey from the San Diego County Apartment Association is based on a survey mailed out to almost 6,000 rental property owners and managers. It received responses from owners and managers who represent 19,682 units.

In a separate report from data company MarketPointe, the county’s vacancy rate is at 4.43 percent, the lowest it’s been for a given March since 2008, when it was 3.63 percent. On a national level, San Diego has the sixth-lowest vacancy rate behind New York City, Minneapolis, Portland, Ore., San Jose and Seattle, the Cassidy-Turley report shows. 

Source:  UT San Diego

U.S. Housing Market Finally Seen Reaching a Turning Point

Optimism is up, but don't expect a quick single-family recovery as the U.S. Housing Market faces a painful shift

By Mark Heschmeyer

May 30, 2012

I put a bid in on a home over the Memorial Day weekend and, judging by the recent housing indicators, it appears I was part of a growing crowd of potential homebuyers poised to jump into the market and disperse the last remaining outsized cloud hovering over the economic landscape. 

It's a compelling crowd because it is not, I believe, made up of vulture investors expecting to feed on bottom housing prices. Instead, it appears to consist of people choosing to get back into the market after being pent up during five years of recession and dim job prospects. And experts say it will drive both single-family and multifamily housing recovery in the coming years. 

"In these initial years, the prime driver of recovery won't be new home construction, but rather demand for rental properties," said Louise Keely, chief research officer at The Demand Institute, a jointly operated non-profit, non-advocacy organization of The Conference Board and Nielsen. "This is a remarkable change from previous recoveries. It is a measure of just how severe the Great Recession has been that such a wide swath of Americans had to delay, scale back, or put off entirely their dreams of home ownership." 

Five years is long time, and a lot can happen in that timeframe to affect consumer housing decisions. College graduates enter the marketplace; newly married couples begin raising children; young professionals advance in their careers; older families shrink as children go off to college (as in my case); and workers retire. All changes that trigger housing changes and housing demand -- and all that will compel economy going forward. 

Consumers are not expected to surge back into the housing market but, as the Demand Institute estimates, the housing recovery will be moderately scaled. We put our bid knowing it was going to be one of multiple offers on a bank-owned property in a resort area. We bid just $100 more than the asking price - nothing extravagant. The asking price had already been lowered by $25,000 last month. The bank accepted one of the other four bids. 

That rejection will not take us out of the housing market, but neither does it compel us to jump immediately on another property. A purchase, after all, requires uprooting families (in our case from Ohio) and is not a decision consumers make at the snap of a finger. The property and the location have to be the right fit. 

However, it is also clear for many at least, that housing affordability, and perhaps just as importantly, consumer confidence, is finally coming around. 

Between 2006 and 2011, some $7 trillion in American wealth was wiped out when home prices dropped 30% after a dramatic climb in valuations during the housing bubble, the Demand Institute estimates. Looking forward, the moderate growth expectations for coming years suggest a slow return to normalcy. As home prices continue to drop and interest rates hover at all-time lows, first-time buyers and others who remained relatively cautious likely will be drawn back into the housing market. 

Optimism Is Up, but the U.S. Housing Market Faces a Painful Shift

None of the positive indicators means that the cloud is gone yet. Four years after the start of the financial crisis, and six years after home prices began to collapse, the market is still shaky. 

About one in four homeowners with mortgages, some 11 million households, are "underwater" -- owing more than their home values. Construction and sales of new homes remain anemic, with housing starts about one-third the historical average. 

Nationally, prices are about 35.1% below their peaks in 2006, according to the S&P/Case-Shiller Home Price Indices released this week. 

"While there has been improvement in some regions, housing prices have not turned," says David M. Blitzer, Chairman of the Index Committee at S&P Indices. "This month's report saw all three composites and five cities hit new lows." 

However, there were some better numbers in the index. Only about half as many cities, a total of seven, experienced falling prices this month compared to 16 last month. 

"Only three cities - Atlanta, Chicago and Detroit - saw annual rates of change worsen in March," Blitzer said. The other 17 cities and both composites saw improvement in this statistic, even though most are still showing a negative trend. Moreover, there are now seven cities - Charlotte, Dallas, Denver, Detroit, Miami, Minneapolis and Phoenix - where the annual rates of change are positive. This is what we need for a sustained recovery; monthly increases coupled with improving annual rates of change. Once we see this on a broader level we will be able to say the market has turned around." 

Mark Zandi, co-founder of Moody's Economy.com, reported the housing crash is "largely over" and points to some strengthening in sales and new-home construction, but does not believe this is enough to lift home prices. 

"The key is getting through more of the distressed properties that are in the foreclosure pipeline," Zandi noted recently, adding that this involves some 3.6 million of the nation's 49.5 million homes. "Until we work through them to a greater degree, that is going to remain a pall over home prices." 

What the Recovery Could Look Like

Initially, according to the Demand Institute, the recovery will be led by demand from buyers for rental properties, rather than, as in previous cycles, demand from buyers acquiring new or existing properties for themselves. More than 50% of those planning to move in the next two years say they intend to rent. 

Most home purchases require down payments of 10% to 20%, which is unrealistic for the majority of first-time buyers, said Jay Lybik, vice president of market research for Equity Residential, at the National Multi Housing Council's (NMHC) Apartment Strategies/Finance Conference and Spring Board of Directors Meeting last week. 

Citing research from the Brookings Institute, Lybik underscored the fact that just 20% of all households can afford to pay $2,000 in cash in 30 days. 

"The theory of national affordability ignores the real parts of what it takes to own a home," Lybik said. 

But don't expect wannabe homeowners to settle for traditional apartments, Lybik said. Many of these households - mostly families with children - seek single-family homeownership because traditional apartment product cannot meet their lifestyle needs. 

Single-family rentals could fit the bill though, he said. 

According to the Demand Institute, this initial rental demand will help to clear the huge oversupply of existing homes for sale. In 2011, some 14% of all housing units were vacant, while almost 13% of mortgages were in foreclosure or delinquent-increases of 12% and 129% respectively over 2005 levels. It will take two to three years for this oversupply to be cleared and at that point home ownership rates will rise and return to historical levels. 

In other key predictions, the Demand Institute said the housing recovery will look like this:

• Housing market recovery will not be uniform across the country. Some states will see annual price gains of 5% or more. Others will not recover for many years. The deciding factors will include the level of foreclosed inventory and rates of unemployment.


• The average home size will shrink. Many baby boomers who delayed retirement for financial reasons during the recession will downsize. They will not be alone. The majority of Americans have seen little or no wage increase for several years, and many will scale back their housing aspirations. The size of an average new home is expected to continue to fall, reaching mid-1990s levels by 2015.


• Consumer industries including financial services, home furnishings, home remodeling will all experience shifts in demand and new growth opportunities. Part of this spending is linked to increases in wealth from improving home valuations, while an even bigger part is tied to the "transaction" of buying or selling the home, which sets in motion increased demand for a wide range of products and services.

 Source: CoStar Group

Bank of America offering up to $30,000 for short sales

By Les Christie

May 15, 2012

NEW YORK (CNNMoney) -- Bank of America is offering some struggling homeowners payments of up to $30,000 if they sell their homes in a short sale and avoid ending up in foreclosure. 

Under the plan, Bank of America will offer homeowners so-called relocation payments of between $2,500 and $30,000 if they sell their home in a short sale. In short sale deals, the sale price of the home is less than what the seller owes the bank. 

The bank first tested the payments in a pilot program in Florida last fall. Under that initiative, Bank of America paid up to $20,000 to borrowers who sold their homes in short sales. 

"This program can help customers make a planned transition from ownership when home retention options have been exhausted or they have made a decision not to keep the home," said Bob Hora, an executive for the bank.

 

Chase started a similar initiative in late 2010 that pays as much as $35,000 to short sellers. Wells Fargo has also paid five-figure incentives to short sellers or to owners who turned over their deeds to the bank.

BofA said it has completed 200,000 short sales over the past two years. These sales are generally more cost effective for banks than foreclosures. 

By avoiding foreclosure, the lenders get distressed properties back from delinquent borrowers more quickly, which helps them to avoid property tax payments, maintenance expenses and legal fees that can build up for months, even years, as foreclosures work through the system.

In addition, the incentives help guarantee the homes will return to the lenders in better condition. Foreclosed properties are often poorly maintained, even sometimes sabotaged, by angry former owners, making them worth far less to the banks.

During the last three months of 2011, foreclosures sold for an average of about $150,000, according to RealtyTrac. Meanwhile, short sales sold for an average of about $185,000.

To qualify for Bank of America's relocation payments, borrowers must obtain pre-approval on sale prices for their homes. The sale must begin by the end of 2012 and close by September 26, 2013.

The exact compensation is determined case-by-case based on a calculation that involves the home's value, mortgage balance and other factors.

Borrowers can call 877-459-2852 to find out if they may be eligible for the program.

Source: CNNMoney

Mortgage delinquencies drop to 4-year low

By Les Christie
May 16, 2012


NEW YORK (CNNMoney) -- The percentage of borrowers who have dropped behind on their mortgage payments fell to a four-year low in the first three months of 2012, a bankers' group said Wednesday.

The Mortgage Bankers Association said Wednesday that the percentage of loans delinquent or already in the foreclosure process during the first quarter was 11.33%, the lowest level since 2008.

That was a decrease of 1.2 percentage points from a quarter earlier and 0.98 percentage point below the rate 12 months earlier.

"Delinquencies are clearly continuing to improve," said Michael Fratantoni, the MBA's vice president for research and economics.

Another hopeful sign is the falling percentage of borrowers who are just getting into trouble, ones who have missed one payment. 

That's useful for predicting the more seriously delinquencies to come.

"Newer delinquencies, loans one payment past due as of March 31, are down to the lowest level since the middle of 2007, indicating fewer new problems we will need to deal with in the future," said Fratantoni.

These new delinquencies represented 3.1% of loans outstanding, according to Jay Brinkmann, the MBA's chief economist. That matches the long-term historical average of 3.1% going back to the 1990s, he said.

"Basically, we're back to normal on that count," he said.
 
One factor that has slowed the healing is the continued difficulty lenders face moving foreclosures through the pipeline, especially in states that involve the courts in the foreclosure process.

In the so-called judicial states, 6.9% of loans are in foreclosure inventory, loans that the banks have begun the legal process of foreclosing on but have not yet taken control of the property through a foreclosure sale.

In non-judicial states, where foreclosures are handled by trustees such as title companies, only 2.9% of loans are in foreclosure inventory.

The difference is mostly the speed that banks can move defaults through the system, said Brinkmann.

One way banks have started to reduce foreclosures is that they are now encouraging short sales, the deals in which borrowers sell their homes for less than what the owe, leaving the banks to absorb the losses.

That can also move delinquent borrowers out of the homes more quickly.

Banks also know that short sales are less costly to them than foreclosures, in which expenses such as property taxes, insurance and maintenance can mount up. In addition, homes repossessed in foreclosures often come to the bank in poor condition, and they command lower prices, on average, than short sales.

The mortgage lenders now often pay large incentives to borrowers willing to cooperate in getting short sales done. For instance, Bank of America is offering some struggling homeowners payments of up to $30,000 if they sell their homes in a short sale and avoid ending up in foreclosure.

Source:  CNN Money

Could Multifamily Lead Single-Family Out of its Recession?

Private Market Lenders, Investors Would Have To Step it Up

 

By Mark Heschmeyer

May 9, 2012

 

 

The nation's housing finance overseer and Freddie Mac are citing the strong multifamily investment market as a reason for pushing ahead on their agenda to gradually eliminate government guarantees in the multifamily sector business and replace them with new private capital sources well ahead of efforts to begin unwinding their single-family finance operations.

Earlier this year, the Federal Housing Finance Agency (FHFA), issued a strategic plan for Freddie Mac and Fannie Mae that envisioned different kinds of roles for the two big government-sponsored enterprises (GSE) within the single-family and multifamily financing business. Doing so, the FHFA argued, could help revive the lagging housing market. 

Unlike their single-family credit guarantee business, the GSEs' multifamily businesses have performed quite well, generating positive cash flow. Last year, the GSEs multifamily businesses produced $1.9 billion in net income, with Freddie Mac accounting for 70% of this gain, as investors poured into the apartment sector. The trend continued in the first quarter of 2012, with Freddie Mac alone producing $624 million in multifamily net income. 

This week, David Brickman, senior vice president of the multifamily business for Freddie Mac, pressed the case further by outlining other reasons why multifamily finance should have a separate and distinct role in housing. 

· With fewer people owning homes, Brickman said there is a clear need to support more rental housing. 
· Private capital is beginning to flow back into the multifamily market. 
· The business processes and systems for single-family and multifamily financing and development are not alike. 
· Multifamily might aid in the recovery of single-family housing by transforming the large volume of distressed single-family properties into rental housing. 

But for such a plan to work, the private sector would have to step up their role significantly in multifamily finance, CoStar Group's financial analysts argue. 

In the past decade, the GSEs have played an important role in high-quality collateral underwriting and securitization, while lower-quality multifamily collateral was often securitized by conduit issuers, according to CoStar analyst Otto Aletter. However, even most of the better quality tranches of the private conduit issuers were created specifically for Fannie Mae and Freddie Mac to buy, increasing the role of the GSEs in the multifamily securitization market across the risk spectrum leading up to the credit crisis, both as originators and investors. 

Since the crisis, GSEs have increased their dominance of the CMBS issuance market even more. This year, GSE issuance is on track to outpace 2011 and pre-crisis levels. While it's a dominant role, it also demonstrates the continuing strength of the multifamily market, Aletter said. 

According to Freddie Mac's Brickman, during the economic crisis, most forms of private capital quickly beat an exodus from the multifamily market. That is now changing. 

"Recently, the demand for multifamily housing has increased occupancy rates, operating income, and property values, creating an attractive environment for new sources of capital," Brickman argued this week. "For instance, at Freddie Mac, since the beginning of 2011, private investors have purchased $18 billion in new multifamily bonds of ours. Life insurance companies, bank conduits, and real estate investment trusts also have demonstrated increased investment activity. Going forward, the increasing availability of debt and equity capital makes possible a broad range of possibilities for the multifamily market, including us." 

"I like that Brickman explicitly says that it has been private investors who purchased $18 billion of their issuance," CoStar's Aletter said. "One of my concerns was that the GSEs could be quietly buying back a lot of their issuance simply due to the preference for holding CMBS rather than individual loans in their portfolios. 

"The resurgence of multifamily securitization demonstrates that investor demand is much stronger for multifamily debt than for debt in other property types," Aletter continued. "Multifamily issuance accounted for approximately 62% of all conduit and GSE issuance in 2011, in contrast to approximately 21% in 2006." 

Because of that investor demand, Aletter argues, "with a slow and deliberate removal of government conservatorship in the GSE multifamily business and a clearer regulatory environment, other market participants and the privatized agency businesses could absorb the lending gap in most markets with minimal marginal costs to borrowers, establishing a healthier foundation for multifamily lending."

 

Source: CoStar Group

San Diego rents expected to rise this year

Reports: Demand outruns supply, so units will cost more and be harder to land

 

By Lily Leung and Roger Showley

May 13, 2012

Rents are expected to rise and competition for apartments may stiffen in San Diego County as more folks defer owning a home amid what appears to be a slowly improving job market.

Rising demand from young workers — also known as Gen Y’ers — fewer new units and tighter standards for mortgages also have pushed people into the rental market.

The result is a jump in rental rates. In March, the average rent in the county was $1,361, up 2.6 percent from a year ago, says real estate data company MarketPointe.

San Francisco finished 2011 with the highest rental-rate increase, at 4.7 percent, based on a separate report from commercial real estate company Cassidy-Turley, which has an office in San Diego. Washington, D.C., placed 10th with a 2.4 percent increase. San Diego County was not among the Top 10.

The county’s vacancy rate — the percentage of rental units that aren’t occupied — is at 4.43 percent, the lowest it’s been for a given March since 2008, when it was 3.63 percent. On a national level, San Diego has the sixth-lowest vacancy rate behind New York City, Minneapolis, Portland, Ore., San Jose and Seattle, the Cassidy-Turley report shows.

A big reason for the area’s lower-than-normal vacancy rate is lack of finished units.

MarketPointe estimates 2,650 units from nine projects are under construction in the county and most of them are expected to come online this year to help relieve demand, company spokesman Russ Valone said. Valone’s analysis shows the last time the county saw anywhere near that many units was in 2004, when 2,273 units were released into the market.

With such scarce inventory, demand is up and incentives either are no longer needed or are far “more modest now,” said Peter Dennehy, a vice president of John Burns Real Estate Consulting in San Diego. He added that rents in the county are expected to increase 3 percent to 5 percent a year this year because of those factors.

Fewer amenities, better price

 

Becky Parker, 24, was among the growing number of 20- and 30-somethings who moved back in with their parents after college to save up for their own pads.

Parker did that for a year, and last month, she moved into a two-bed, two-bath apartment in Solana Beach. She shares the apartment with a roommate for $1,695 a month, slightly lower than the average rent in that part of the county, according to MarketPointe figures.

“I looked at different places there and in La Jolla,” said Parker, a recent graduate of Loyola Marymount University in Los Angeles. “I chose this one because … it had the best price point.”

However, Parker had to sacrifice a few amenities to get the more affordable price, including an in-unit laundry machine and dryer and more up-to-date appliances.

‘We’re a little spoiled’

 

Daniel George, 30, and his wife went the opposite direction when it came to amenities and price. They spent the first quarter of the year looking for a newer rental in the county that was more decked out.

Last week, the couple from Los Angeles moved into a rental at Circa 37, what will be a 307-apartment community in Mission Valley that boasts a 10,000-square-foot recreation center, lounge, fitness center, spa and junior Olympic-size saltwater pool. They pay $2,200 a month.

“Before, we lived in a brand-new apartment when we were in L.A.,” said George, who relocated to San Diego for a tech job. “I guess you can say we’re a little spoiled. Where we were living, we had stainless steel appliances and hardwood floors. And a lot of the (other) places in (Mission Valley) didn’t have that.”

Homeownership rate low

 

What George and Parker, the Solana Beach renter, have in common is that neither are ready to be homeowners.

The U.S. Census Bureau reported the national homeownership rate was 65.4 percent in the first quarter, the lowest it’s been for a first quarter since 1997. The homeownership rate among those under 35 is 36.8 percent, the lowest it’s been in 17 years.

“We want to be free, to move depending where our jobs are,” said George, who signed a 15-month lease at Circa 37. He and his wife expect to stay there for two to three more lease terms.

Parker, the recent college graduate, says she expects to rent for at least five years.

“Buying a home,” she said, “I don’t know too much about it right now. Maybe once I settle down and everything.”


Source: UT San Diego