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