Rents Rise As Housing Market Slows
(The slowing housing market is pretty much affecting ever sector of our economy and businesses. )
Now, it even seems to be having an effect on rental rates around San Diego County.
Rents have been increasing around the city, as potential home buyers are staving off the local housing market, waiting for prices to drop further before buying.
There are various factors that have contributed to the rising rental rates, but one huge factor seems to undoubtedly be the slowing housing market.
Since the market is so slow, and houses are not selling like they used to it is easy to see why rental rates are going through the roof. Since housing purchases have declined, people have to be living somewhere, leaving the only other option as the rental market.
A September 22, 2006 article by Emmet Pierce of The San Diego Union Tribune, “Rents rise in sluggish home buying market,” explains what is happening in the rental and housing markets.
“The ongoing slump in San Diego County home sales appears to be benefiting the region's landlords. A 3.81 percent increase in the past year to an average rent of $1,241 is the biggest gain in rental rates since September 2002, when average rents increased by 5.68 percent, according to a recent survey by MarketPointe Realty Advisors. It compares with annual increases of 3.2 percent in September 2005, 3.12 percent in 2004, and 3.64 percent in September 2003.”
So we are now seeing the biggest increase in rent rates in 4 years. The demand for rental units is so high right now because nobody wants to buy, or at least not nearly as many as opposed to a few years ago.
The slowing market has turned potential home buyers into renters waiting things out.
Renters who otherwise might buy homes are biding their time as home prices flatten, said Bob Pinnegar, executive director of the San Diego County Apartment Association. ‘I think it is a reflection of the slowdown on the purchasing side,’ Pinnegar said. ‘If I was in a situation where I was going to buy my first home, I would hold off and see what will happen with the market. People are going to start buying as prices drop.’”
The apartment vacancy rate has also dropped. Six months ago, we had a 3 percent vacancy rate, and that has now dropped to 1.8 percent.
Another reason for the rising rents is that many apartments have been turned into condo conversions, which have to be bought.
Also, there has been hardly any new apartments added to the pool lately, increasing the competition between units.
“Valone said the supply of new apartments hasn't kept pace with demand. ‘While there have been nearly 18,000 new apartment units added to the marketplace since April of 1998, over the past six months only 242 new units were released,’ he wrote. ‘ . . . A total of only 592 units were added to the marketplace over the past year, marking the lowest addition to the market in the last eight years.’”
