Silicon Valley apartment rents plunge, SoCal’s rise

Michael Liedtke

Thursday, July 17, 2003 | 9:47 a.m.

SAN FRANCISCO -- The enduring high-tech slump pushed Silicon Valley apartment rents to a five-year low in the second quarter, providing a stark contrast to Southern California's still-surging market, according to a survey scheduled to be released today.

The study by research firm RealFacts said the monthly apartment rents in the high-tech hub of Santa Clara County fell 8.9 percent from last year to an average of $1,308, the lowest level since June 1998.

Novato-based RealFacts surveyed 9,200 apartment complexes in 26 major markets in the West and Southwest, and found relatively little change in most spots outside California, a perennially expensive place to live.

Seattle, with an average rent of $861, ranked as the West's most expensive apartment market outside California. Tucson, Ariz., offered the lowest rent, at an average of $608, among the Western markets surveyed by RealFacts. The average in Las Vegas was $739, up 0.3 percent from June 2002.

The San Francisco metropolitan area -- including San Mateo and Marin counties -- continues to demand the West's highest rents, averaging $1,554 in the second quarter, a 6 percent decline from last year.

The drop continued a steady descent since San Francisco metro area apartment rents peaked at $2,361 per month in September 2000, according to RealFacts. The reversal of fortune has saved renters nearly $9,700 annually.

Although its apartment rents are still higher than almost anywhere else in the country, the San Francisco Bay Area has become more affordable during the past two years as massive high-tech layoffs squeezed household incomes and forced landlords to give tenants a break.

When the rise of the Internet fueled a tech boom in the late 1990s, eager workers flocked to the Bay Area, creating such intense demand for housing that rents in some markets soared by as much as 35 percent annually.

With the latest erosion, Santa Clara County rents have plunged 33 percent below the market's peak of $1,950 in March 2001, according to RealFacts.

The decline has been so dramatic that renting an average apartment in Los Angeles County is now more expensive than in the Silicon Valley -- the first time that has happened during the decade RealFacts has been tracking markets.

"It's really an astonishing change," said Caroline Latham, RealFacts' chief executive.

Los Angeles apartment rents averaged $1,326 in the second quarter, a 5.9 percent increase from the prior year. Rents also rose in Orange County and San Diego, although the gains weren't enough to surpass Santa Clara County.

The average apartment rent in Orange County stands at $1,258, a 4.5 percent increase from a year ago, while San Diego's apartment rents averaged $1,158, a 2.9 percent market.

Southern California's biggest rent increases occurred in San Bernardino and Riverside counties, where rents averaged $924, a 7.2 percent increase from last year.

The Sacramento metro area emerged as Northern California's lone hot spot, with rents averaging $885, a 2.9 percent increase from the prior year.

The divergent directions of apartment rents in Southern California and the Bay Area mirror the contrasting conditions in their local economies.

Santa Clara County is struggling with an unemployment rate of 8.5 percent, according to preliminary state figures for June, much higher than the statewide rate of 6.7 percent. Government officials estimated Los Angeles County's June unemployment rate stood at 6.9 percent.