by Christopher
18. July 2009 05:16
There has been a lot of discussion lately around the bi-products of the real estate "fall-out" in my rental corner of the market: namely its effect on the residential leasing market. The main theme/myth that my partners and I come across is that the rental market is and will be stronger because people can't buy, don't want to buy or are forced to rent because they can't afford their house anymore. There is a level of truth to all of these statements. That said, under these sorts of market conditions, rents are not likely to increase. In fact, under current market conditions Marin rents on residential homes will decrease.
It becomes a simple supply and demand equation. Homes that are not selling on the traditional sale market are hitting the rental market, thereby increasing the suppy. Many potential renters who were working in the Bay Area have lost their jobs, and many who haven't either are not moving or are significantly downsizing. The result is a lot more inventory and a lot less demand.
A recent nationwide study of rents and occupancy, conducted by RealFacts (based in Novato CA.) for 2Q09 had the following to say:
According to a May 2009 survey released by the EDD, California’s unemployment now stands at 11.5%, compared to the National average of 9.4%. The San Francisco Business Times reported that the San Francisco Bay Area has lost 130,000jobs from May 2008 to May 2009. Companies such as Yahoo! Inc., headquartered in Silicon Valley have had to make cuts of about 10% of its regular staffers.
Rents were in decline in every market nationwide in the current quarterwith the exception of a few modest increases in Tampa-St Petersburg, FL at 1.2%; Kansas City, MO at 0.7% and San Antonio, TX at 0.6%. On average,asking rents are down nationwide in the second quarter of 2009 from $968/mo.over first quarter at $978/mo. The markets that were hit thehardest this quarter are high-end markets such as those found in the Golden State. The San Francisco Bay Area, usually ranked as the most expensive place to live in the country lost some of its luster this quarter. The current quarter’s decline comes upon the heels of similarlosses sustained in 1Q09.
It’s seems today’s renter is looking for a bargain. There aren’t enough
high income renters with good credit to commit to premium rents
prevalent in high-end markets. Many renters have been forced out of
high markets dueto lack of employment opportunities or sufficient
income. In some cases these renters decide to move to a location where
housing is less expensive and where they can rent the same quality
apartment unit for less than half the price.
My team and I specialize in Marin Rentals and welcome questions or comments. Email me anytime at cbar@jwavro.com.
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