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

The FDIC Introduces New Risk Rules for Banks

Published: Tuesday, 29 Mar 2011 | 12:16 PM ET

By: John Carney
Senior Editor, CNBC.com

The new risk retention rules proposed by regulators today are far more stringent than major banks had hoped they would be.

The FDIC today revealed a new set of rules that would implement a provision of the Dodd-Frank financial reform law mandating that banks maintain at least 5 percent of the risk of mortgage securities they package.

Banks had pushed for regulators to adopt an expansive definition of the “qualified residential mortgage” that would be exempt from the requirement.

Regulators rejected the most expansive versions of a qualified residential mortgage, which would have exempted virtually every mortgage that banks are now making. Instead, only very conservative, traditional mortgages will qualify.

The purpose of the risk-retention provision of Dodd-Frank was to insure that banks have “skin in the game” when they securitize mortgages—with the hopes that this will incentivize them to police the quality of mortgages that get bundled and sold to investors.

Many lawmakers believe that the ability of banks to distribute the risk of mortgages to investors led to loose underwriting, bad loans, and contributed to the severity of the financial crisis.

The rule proposed today would only exempt securities entirely composed of very high quality home loans. The tests for quality include a requirement for a 20 percent down-payment, a maximum loan to value ratio of 80 percent, a very strong borrower credit history, and a low ratio of borrower debt-to-income. No interest-only loans are allowed, and adjustable-rate mortgages are strictly limited.

The rules are so strict, in fact, that a single loan to a homebuyer who had missed a single credit card payment in the past two years could disqualify a bundle of thousands of mortgages. Such loans would have to be excluded from the securitization.

Bank lobbyists argue that these rules will constrict mortgage lending, make non-qualifying mortgages more expensive, prevent a revival of the mortgage securitization market, and hurt the housing market.

Sheila Bair, the chairman of the Federal Deposit Insurance Corporation, believes that the rules will actually help securitization by instilling investor confidence in the quality of the underlying loans.

Source: CNBC

ARG Capital finds $16M for office building

Monday, January 31st, 2011

TAMPA - The San Diego office of ARG Capital Partners announced it has arranged joint venture equity totaling $16 million for its client Feldman Equities, Inc.

ARG assisted Feldman Equities in securing an all-equity closing on the acquisition of a distressed mortgage note secured by a Class A, 134,065SF office building in Tampa. Given the time-sensitive nature of the transaction and the closing deadline imposed by the note seller, an all-equity closing was required.

Bryan Clark, director of capital markets with ARG Capital Partners, arranged joint venture equity on behalf of the sponsor, Feldman Equities securing a letter of intent for $16M in joint venture equity, with terms acceptable to the note seller, sponsor, and joint venture partner, for an all-cash closing within five days of notification that the previous partner had backed out - with the closing of the acquisition taking place 15 days later.

ARG Capital Partners arranged the joint venture equity through a real estate private equity firm whose principals each have over 20 years of experience.

ARG Capital Partners represented Feldman Equities, Inc., an operator having developed or acquired over 11 msf of office and retail properties with an aggregate value in excess of $2.5 billion.


Source: FloridaRealEstateJournal

Apartments Capitalize on the Trend toward Sustainable Development

By Andre Shashaty, Partnership for Sustainable Communities

Mar 22, 2011

Apartment owners can be excused if they feel like gloating. Many of them watched in amazement as homeownership rates reached a record high of 69 percent, and young families could get a mortgage even if they could not qualify for a lease. Now, the pendulum is swinging the other way, and the apartment business looks primed for a powerful resurgence.
The rental housing industry stands to benefit from a number of trends, including the increasing emphasis in urban planning and land use policy to encourage compact development in infill locations where people can walk or take public transit. Policy makers are realizing rental housing is generally more sustainable because it is usually built at higher densities.
“Not only do apartments offer housing to a wide range of households, they can also help us meet critical national goals like reducing greenhouse gasses, growing more sustainably and creating mixed-use, pedestrian-friendly communities,” says Doug Bibby, president of the National Multi Housing Council.
The shift toward more sustainable development patterns is occurring in cities and towns throughout the nation, the Partnership for Sustainable Communities (PSC) has found. PSC is a national nonprofit organization dedicated to helping real estate developers and owners work with local government planners and development agencies to create more sustainable communities.
In California, multifamily buildings will play a crucial role in meeting the state-mandated goals for reducing per capita emissions of greenhouse gases from private vehicles. The state’s so-called anti-sprawl legislation (Senate Bill 375) requires every regional planning organization in the state to draw up a Sustainable Communities Strategy by changing land use patterns. Key to its success is higher density and focusing development of housing around transit lines.
The law encourages higher-density and transit-oriented development in two ways. It puts new teeth into existing law requiring localities to zone land for affordable housing. It also provides exemptions from very stringent state environmental review requirements for projects that provide affordable housing and are located near transit.
Many other states are also encouraging changes in land use patterns to help reduce greenhouse gas emissions. 
The flip side of the trend toward rental housing is reduced construction of single-family homes on large lots remote from jobs and services. Indeed, the homeownership boom ended with a thud as foreclosures skyrocketed, especially in cul de sac suburbs far from jobs and from which long commutes by car cost big dollars.
Even among companies who are developing rental housing, to an increasing extent garden apartments are out and infill developments are in. Some firms are still building garden apartments out in the suburbs, but the biggest apartment investors no longer see that as a smart investment for long-term holding periods.
Savvy developers such as Equity Residential, SARES REGIS and UDR, among others, are gearing up to resume development, and they are choosing “sustainable sites” near transit and services. They are even putting in car sharing services as a benefit for people who don’t want to own their own car or possess more than one car per household.
There is also good news on the financing front with regards to the creation of rental housing, and thereby more sustainable developments. The Obama Administration’s recent 32-page report to Congress on “Reforming America’s Housing Finance Market” calls for cutting way back on federal support for home mortgages but for maintaining a federal role in supporting financing for apartment properties.
NMHC says the nation is experiencing a boom in renter households that will continue for years to come. “We saw a surge of 2.7 million renters from 2005 to 2007 alone,” Bibby says. “Between 2008 and 2015, nearly two-thirds of new households formed will be renters. That’s 6 million new renter households,” he stated.
The new demographic groups are increasingly turning away from the one-time ideal of living in a single-family home on a large lot surrounded by other similar homes. A large proportion of them want to live near transit, and within walking distance of services and entertainment. That usually means renting. That’s good for apartment owners and developers. It’s also good for the sustainability of our communities.
There has also been a change in attitudes about the financial benefits of ownership. Until the recent spike in foreclosures, a large percentage of home sales were premised on the idea that buying was a financial investment, not just a way to obtain shelter. That is shifting dramatically as more and more households make housing choices based on lifestyle or even environmental factors, and no longer assume that owning is a good investment.
The new housing choices will be largely a function of changing demographics, according to NMHC. The aging members of the Baby Boomer generation are increasingly opting to trade in their suburban houses for apartments as they age and their children move away from home, NMHC says. According to Census data, 75 percent of all seniors will change housing type between ages 65 and 80.
A more powerful force for rental demand are the Echo Boomers, that is, the children of the Baby Boomers. By 2015, there will be 67 million people aged 20-34 year of age, the prime years for renting. A large portion of this population will be living in more sustainable rental communities.

Source:  MHNonline

North Park San Diego Apartment Complex Sold

Press Release

February 8 , 2011

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North Park San Diego Apartment Complex Sold

 "Just Sold North Park Apartment Complex - San Diego"

SAN DIEGO, CALIFORNIA – The two-story 6,638sf, 8 unit apartment complex located at 3983 Iowa Street San Diego, CA 92104 in the North Park neighborhood has been sold for $975,000.

The building was constructed in 1966 and consists of four (4) two-bedroom/two-bathroom units, two (2)  two-bedroom/one-bathroom units and two (2) one-bedroom/one-bathroom units. James V. Carter, Managing Director with Apartment Realty Group (ARG) represented the seller, a San Diego-based private investor.

For more information, please contact James V. Carter at (619) 222-9501, JCarter@ARG1031.com or Anastasia Duboshina at (619) 501-1342, ADuboshina@ARG1031.com

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Apartment Realty Group (ARG) is a multifamily investment sales and advisory services firm with a
proven track-record of value-added brokerage services. ARG has been able to provide sellers with
specialized strategies to maximize property values by creating competition for each marketing assignment as well as providing buyers and 1031 exchange clients with sound investment options which are not generally available in the marketplace. Visit us online at: www.ApartmentRealtyGroup.com