West’s apartment rents flat everywhere but California

Michael Liedtke

Friday, Oct. 18, 2002 | 10:08 a.m.

SAN FRANCISCO -- Summertime apartment rents remained stable in most major Western markets except California, where prices at the two ends of the state continued to shift in distinctly different directions, a new report says.

The Los Angeles and San Diego markets emerged as the hottest rental market in a quarterly survey covering nine Western states while rents in parts of the San Francisco Bay area market slumped to their lowest levels in three years.

Outside California, rents in most Western markets changed by 1 percent or less from the same time last year, according to RealFacts, the Novato-based research firm that surveyed apartment complexes.

As of Sept. 30, the average rent in Los Angeles stood at $1,295 and the average rent in the San Diego metropolitan area was $1,137, according to RealFacts. Both those figures represented an annual rent increase of nearly 6 percent.

In the San Francisco metropolitan market, the average third-quarter rent was $1,632, a 12.8 percent decrease that rolled back prices to mid-1999 levels, RealFacts said.

The San Francisco market's seventh consecutive quarter of rent declines reflects a steep slide in the high-tech market that has dried up incomes and demand.

Rents fell even farther, by 15.5 percent, in Santa Clara County, the hub of Silicon Valley, where the average rent of $1,427 was the lowest since the first quarter of 2000, the prelude to the area's high-tech blues.

Other strong markets included the most affordable parts of Southern and Northern California. The average third-quarter rents in Riverside and San Bernardino counties and the Sacramento area climbed nearly 5 percent to $875 and $864, respectively, RealFacts said.

The stagnant rents in markets like Seattle, Denver and Portland, Ore., stemmed from a sharp decline in mortgage rates that has made home ownership more affordable to many renters living in those areas, said RealFacts spokesman Gerald Cox.

While mortgage rates also have dropped in California, mid-priced homes in the state's biggest markets remain too expensive for most renters, giving landlords greater leverage.

The typical monthly mortgage payment in the Bay Area was $1,966 during August, according to DataQuick Information Systems. A mid-priced Bay Area home sold for $417,000 in August, according to DataQuick.

In Southern California, DataQuick pegged the typical monthly mortgage during August at $1,311. A mid-priced Southern California home sold for $278,000 in August, DataQuick said.

Southern California's rising rents underscore the diversity of the region's economy compared to the more tech-dependent Bay Area, Cox said.

It appears the Bay Area rental market is nearing a bottom, Cox said.

In an encouraging sign for landlords, Sept. 30 vacancy rates in San Francisco and the Silicon Valley were slightly lower than June 30.

At the end of the third quarter, San Francisco's apartment vacancies averaged 6.6 percent, down from 7 percent at the end of the second quarter. In the Santa Clara County, the June 30 apartment vacancy rate of 6.5 percent fell to 6.2 percent as of Sept. 30.

By comparison, the Sept. 30 vacancy rates in the Los Angeles and San Diego apartment markets were 4.4 percent and 3.9 percent, respectively.

Outside of California, average rents ranged from $864 in Denver and Seattle to $741 in Reno, up 0.1 percent; $737 in Las Vegas, up 0.5 percent; and $607 in Tucson.