Bay Area rental market hits a happy medium
From today’s Chronicle, “I think it’s actually pretty nice,” [one renter] says. “I feel like I got a good place for a good price.”
“And that, say the experts, is the sign of a healthy, balanced rental market. [This renter] didn’t, as it seemed many prospective Bay Area renters had to do during the dot-com boom of the ’90s, have to lug around suitcases of cash, sign over her firstborn child or engage in a high-stakes bidding war. Conversely, desperate landlords don’t have to behave like barkers in front of a Broadway strip club, luring renters with lavish incentives as they did during the bust that followed the boom.”
“It’s a matter of balance,” says Chris Bates, marketing director of Realfacts, a market research firm in Novato. “At this point, neither side has a huge advantage. Neither has a disadvantage. Renters aren’t being gouged, and landlords have some space to increase rents at a reasonable rate as the economy grows.”
“The latest numbers, says Bates, bear that out. After a three-year period in which occupancy and rental rates remained flat throughout the Bay Area, there has been a slow, gradual increase during the past year. In San Francisco, occupancy rates went from 92.5 percent in the first quarter of 2004 to 95.5 percent in the third quarter of 2005.”
“The state Employment Development Department reported that employers added 26,200 jobs in Oakland and San Francisco between August 2004 and August 2005. This, say some analysts, has contributed to the rise in occupancy rates. Because they have the potential to reduce the amount of rental stock, low interest rates and other incentives, such as interest-only loans, may be factors as well.”
What do I think about this? I think this is a sign of a stronger economy. Renters do not have as many choices as they did for the past three years. Many companies are hiring significant numbers of new employees (such as Yahoo & United Airlines), and people in steady jobs are getting raises and feeling that they have a bit of job security. With these numbers improving steadily, that will definitely affect the home purchase market. Once the rental supply tightens even just a little bit more, rents will start to rise again, even if just slightly. That will give home buyers more reason to consider purchasing. And with new units being built in Rincon Hill and South Beach, there should be lots of new construction options for them to choose from, as well as new individually-financed TIC units.
This is really good news across the board. A healthy economy is good for everyone. It’s doubtful that we’ll go back to the rental mayhem of 1999/2000 anytime soon, if ever, but it’s obviously becoming more and more difficult to find a great rental.
The only thing this doesn’t bode well for is naysayer journalism. They’re running out of doom & gloom articles to write as the housing markets for both rentals and sales continues to defy their expectations.
