S.D. County apartment rents to rise slightly through '12; vacancies to stay flat

By THOR KAMBAN BIBERMAN, The Daily Transcript

Tuesday, April 12, 2011

 

 

Rents are projected to rise slightly in San Diego and Orange counties, and the Inland Empire counties of Riverside and San Bernardino for the next two years, according to a report.

Los Angeles County is expected to see a minor rent decline during the same period.

The 2011 University of Southern California Lusk Center Casden Multifamily Forecast reported San Diego County's rents are expected to increase 0.4 percent in 2011 and 0.8 percent in 2012, while vacancies are projected to remain flat through 2012.

San Diego County was the only one of the four Southern California markets that saw a decline in rents and only declined by 0.2 percent last year to about $1.53-per-square-foot, or $1,338 for an 875-square-foot unit.

MarketPointe Realty Advisors pegged the average rent in roughly that same range at $1,335 per month as of the end of last March -- still quite a high figure when compared with most of the rest of the country.

However, it is significantly lower than the $1,501 average rent for the Los Angeles metropolitan area and the $1,475 average for Orange County.

"Though there's evidence that rents have begun rising at the national level, the most positive news we have in Southern California is that rents have stopped falling after two years of negative growth," said forecast co-author Tracey Seslen, of the Lusk Center.

"Rents and vacancy rates will likely remain at their current levels for the next two years, signaling stabilization in the market and that the worst may be over," Seslen said.

The Casden forecast stated the La Jolla/University City markets are expected to see the largest rent increases at about 1.3 percent over the next two years.

The Chula Vista/Imperial Beach submarket is expected to see a similar increase in rents over the same period, but this may be tempered somewhat by the addition of 774 new units this year.

The area in and around San Diego's downtown core plus Coronado that Casden refers to as "Intown" is expected to be the weakest performer with a projected 2 percent decrease in rents this year, followed by a modest increase in rents in 2012.

The rent decrease in the Intown area is despite a projected vacancy plummet from 9.3 percent down to 5 percent over the next two years.

The county's vacancy ranges extended from Intown's 9.3 percent to just 2.4 percent in the La Jolla/University City submarket.

The Casden forecast reported the county's overall vacancy declined by 0.4 percent in 2010 to 4.6 percent.

MarketPointe, which limits its survey to complexes with 25 or more units, saw a 5.06 percent vacancy in March.

A 5 percent vacancy level is considered the industry standard for a balanced market.

After a couple of years of negative job growth, the Casden forecast said San Diego County only managed to add 5,200 jobs in 2010.

The figure is expected to range between 10,000 and 20,000 this year.

"While we are no longer hemorrhaging jobs, home affordability remains bleak in some areas, both of which bode well for the multifamily market," said co-author Richard Green, director of the USC Lusk Center and co-author of the Casden forecast.

"However, it is unlikely that rents will rise until the greater economic health of the region improves and some of the excess inventory in the housing market disappears," Green said.

Construction activity continues to be limited in the wake of the recession.

The Casden forecast said the 774 new apartment units in the Chula Vista/Imperial Beach market will represent a 2.9 percent increase in supply this year.

The 1,051 new apartment units slated for countywide completion represents a 0.4 percent increase in 2011.

The forecasters, with an eye towards the investment market, like that there is very little shadow inventory in San Diego and even with sharp home price decreases, it remains difficult for many would-be homeowners to qualify.

As for the other markets, the vacancy rate in Los Angeles County is projected to decline by less than 0.5 percent over the next two years.

L.A. checked in with a 5.9 percent vacancy rate along with that relatively expensive $1,501 average rental rate that is expected to decline by 3.2 percent over the next two years.

The Inland Empire still hasn't recovered from the recession.

That region lost 7,600 jobs in 2010, but 10,000 to 20,000 new jobs are still expected in 2011.

Rents in the Inland Empire are projected to remain flat through 2011 and rise 0.5 percent in 2012.

The region's average rent was $1,034 per month. Vacancy rates, which are averaging 6.1 percent are projected to remain flat for the next two years.

Orange County, which had a $1,475 average rent and a 5.1 percent vacancy at the time of the survey, is expected to see little change in rents or vacancies over the next two years.

Source:  SanDiegoSource.com

SoCal Apartment Rents Head Toward Stabilization

By Bob Howard

LOS ANGELES-Apartment rents have flattened out in Southern California, which is an improvement after two years of decline, according to the USC Lusk Center Casden Forecast. The forecast predicts that rents will remain flat for Orange County, San Diego County and the Inland Empire for the next eight quarters, with a slight decline in Los Angeles County. It says that the flattening is a sign of stabilization and likely means that the worst is over for the region’s apartment rental picture.

 The Casden study showed what it called “across-the-board improvements in rents and vacancy rates in 2010.” Co-author of the forecast, Tracey Seslen, of the Lusk Center, said, “"Though there's evidence that rents have begun rising at the national level, the most positive news we have in Southern California is that rents have stopped falling after two years of negative growth."

Vacancy rates, however, remain from 1% to 3% above their natural levels, the forecast said. Rent changes ranged from an increase of 1% in the Inland Empire and a decrease of 0.2% in San Diego County. These compare with rent growth rates of 2.3% nationally and 1.7% in the West.

The region studied by the forecast comprises 40 submarkets, with rents remaining flat or increasing in 26 of the 40 in 2010, compared to only three submarkets in 2009. The forecast identifies five factors that will guide the future health of the overall SoCal multifamily market: employment; decreased apartment demand brought on by lower home prices; competition from shadow-market inventory; continued reduction in multi-family construction activity; and high oil/gasoline prices, which encourage employees to move closer to their workplaces.

According to the February jobs report, California has added 100,000 new jobs; however, home prices remain high in San Diego and Orange County. Richard Green, director of the USC Lusk Center and co-author of the Casden Forecast, observed:

"While we are no longer hemorrhaging jobs, home affordability remains bleak in some areas, both of which bode well for the multifamily market. However, it is unlikely that rents will rise until the greater economic health of the region improves and some of the excess inventory in the housing market disappears."

Using data from MPF Research and other sources, the Casden Forecast analyzes building permits, occupancy, rents and employment data in 40 submarkets that compose the four SoCal regions. For the first time, the report offers a two-year forecast for each submarket in addition to four market forecasts. The complete forecast, available online, includes highlights from each market.

Source: GlobeSt.com

What's making San Diego County rents go up?

Experts across the nation point to three key economic drivers

By Lily Leung

Thursday, March 31, 2011 at 6 a.m.

 

San Diegans are paying slightly more rent in March than a year ago — driven by minor traction in the local job market, an uptick in distressed homeowners having to lease again and more young adults leaving Mom and Dad’s nest after a brief post-college stay.

The average monthly rent in the county increased 1.5 percent, to $1,335 in March from $1,315 the same time last year, according to numbers from a twice-yearly rental report from MarketPointe Realty Advisors, a San Diego-based data company.

The report also showed the average vacancy rate in the county is 5.1 percent, up from 4.8 percent one year ago. Alan Nevin, the company’s director of economic research, said an autumn infusion of 679 units from failed condo project Vantage Pointe in downtown San Diego fueled the vacancy increase. Despite that, rental experts say, a 5 percent vacancy rate is fairly healthy.

The San Diego rental market is stable and will likely see steady increases this year tied with the normal rate of inflation, according to property managers and data analysts. Peter Dennehy, a vice president of John Burns Real Estate Consulting, says the local market echoes what’s happening nationwide: Rents are increasing as an anemic economy gains strength and fewer people can afford to buy a home. The consulting company, which has an office in San Diego, projects rent locally will jump 30-plus percent within five years.

Similar increases are expected in other areas, including Seattle and Boston.

“People are out shopping,” said apartment manager Luis Leguizamo, who recently tacked on $25-30 a month for residents at the Loma Portal Apartments, near Point Loma.

“The economy is somewhat stimulated,” he added. “People are in the position to move and consider paying a higher rate.”

Here’s a look at some of the factors that are driving up rental rates:

The local economy

More Californians are getting jobs, part of what’s helping the rental market.

The state created almost 100,000 jobs in February, mainly in areas such as technology and construction. San Diego’s job count went up by 2,000.

Though many of the jobs that were lost during the recession have yet to be recouped, “things are firming up in the labor market,” said Dennehy, of the real estate consulting firm.

Supply is also coming into play. He said there’s little apartment construction in the county, which over time could be an issue in an area popular for its favorable weather, beaches and amenities.

During the past five years, San Diego has added about 1,000 new rental units each year. This year’s projection is less than half of that, at 402, Dennehy said.

“New apartment construction requires land and financing, and in this recession, there is not a lot of land or financing,” he said.

Distressed are renting

Many homeowners in San Diego struggling to make their mortgage payments have shifted back to renting because it’s more affordable, and with a foreclosure on their record, it’s likely the only option.

It’s unclear how many are leasing again. But nearly 12,000 San Diegans lost their homes last year, according to analyst firm DataQuick Information Systems.

Homeowner Crystal Dooling and her young family, who live in North County, are in the process of foreclosure, spurred by overwhelming medical debt. They’re also hunting for a rental, which can be a struggle for a mother of three and working father. What makes the task harder is the future red mark on their financial records.

“A Realtor tells me, ‘I’m going to have a hard time pitching you as a tenant. I don’t know if people are going to take a chance on you,’ ” Dooling said.

Property managers throughout California have said they’re willing to work with would-be renters such as Dooling to find a proper home. All they ask is that prospective tenants be clear and forthcoming about foreclosures or defaults.

Eric Wiegers, of the California Apartment Association, said some landlords might charge higher security deposits to these tenants.

By state law, the maximum deposit is two months’ rent for an unfurnished rental and three months’ rent for a furnished one.

“People are definitely doing that,” Wiegers said. “It’s a legitimate practice.”

Leaving the nest

Another driver of higher rents is a trend called unbundling. This happens when college grads, often without jobs, return to their parents’ homes for a year or two, and then after saving up for a year or two, move out.

“As the job market gets better, folks who were forced to double up can now live alone,” said Nevin, of MarketPointe.

Chris Brown, a vice president at rental site Apartments.com, says a primary indicator of unbundling is an increase in searches for one-bedroom rentals. Searches for one-bedroom apartments in San Diego on the website rose 15 percent from February 2010 to February 2011.

If they’re not looking for a one-bedroom home, many young adults are bundling up with other young adults to save money, yet be independent from their parents.

Carmelina Castillo and her boyfriend both left their parents’ places and moved into the Vantage Pointe complex in November. She got a job as a purchasing manager of a clothing store, they were financially ready and her boyfriend kept getting edged out by cash investors while house hunting. “Our down payment wasn’t big enough,” Castillo said. “It wasn’t feasible for us, so we thought it’d be better to rent and enjoy the downtown life.”

Source: SignOnSanDiego

San Diego econ index jumps record 1.9%

Improvements in home construction and employment indicate recovery is picking up steam

By Dean Calbreath

Originally published March 31, 2011 at 12:39 p.m., updated March 31, 2011 at 5:23 p.m.

San Diego's leading economic indicators jumped by their highest level on record last month, driven by an improving job market and a pickup in home construction, the University of San Diego reported today.

"February’s record gain suggests a pickup in the pace of the local economic recovery, which has been slow," said USD economist Alan Gin, who compiles the local index of economic indicators for the university's Burnham-Moores Center for Real Estate.

But Gin cautioned that the county still has a long way to go to before it returns to pre-recession norms. Even though the job market has added 23,000 jobs since hitting bottom in January 2010, it is still has roughly 100,000 fewer jobs than at the beginning of the recession.

Here are how the six leading indicators performed over the last two months (today's report includes January, which was delayed as the state recalculated employment data):

• Home construction. Building permits for residential units more than doubled in the first two months of 2011 compared to the same period in 2010. But that's a relatively low bar to hurdle, since 2010 was one of the worst periods on record.
• Unemployment. First-time claims for jobless benefits hit their lowest point since September 2008. The jobless rate dropped to 10.1 percent in February - or 10.0 percent after adjusting for seasonal trends, including the layoffs of temporary workers hired to handle holiday sales and year-end inventory management. For the first time in nearly two years, it seems that San Diego may be on the verge of returning to single-digit unemployment.
• Hiring. Online job postings in February hit their highest level since November 2008, according to an index maintained by Monster.com. There were pickups in hiring in nearly every industry, including particularly strong increases for business and financial operations, computer and mathematics, life and social sciences and arts, design and entertainment. A Monster.com report released today shows that the upward trend continued in March, except at a slightly slower pace.
• Consumer confidence. Local consumer confidence continued to rebound during the first two months of the year, despite higher gas prices and a stubbornly high unemployment rate. Starting this month, changes in the national index of consumer expectations will be used to approximate local consumer confidence, because the Union-Tribune discontinued its local polling in January.
• Stock prices. As of February, local stock prices advanced for seven consecutive in a row.
• National economy.The pace of national economic growth is slowly accelerating, with the GDP growing at a 3.1 percent annualized rate in the fourth quarter, up from 1.7 percent in the second quarter and 2.6 percent in the third quarter. But economists speculate that the pace may slow down, because of rising fuel prices as well as some supply line disruptions related to the earthquake and tsunami in Japan.

Source:  SignOnSanDiego