Weakness in Economy Slows Rent Growth
- Jul 21, 2008
By Anuradha Kher, Online News EditorNovato, Calif.–Average rents across the West Coast, Midwest and Florida increased by only 0.6 percent since March 2008 and by 2.5 percent in the past year, according to a recent survey released by RealFacts, a multifamily data company. The company currently has data only on these three regions.Based on the findings of this report, apartment rent has become even more affordable, relative to other items in the household budget.Of the 31 metro areas covered in the RealFacts synopsis, 23 experienced quarterly rent growth.Although rents are still increasing very slowly, the rate of increase has declined significantly. In December 2007, the annual rate of increase was 3.6 percent, and a year ago, in June 2007, the annual rate of increase was 4 percent. The current rate of increase puts rental housing far behind the inflation index, which stood at 4.18 percent in May 2008.“There is no direct correlation between foreclosures and rents going up,” Caroline Latham, CEO of RealFacts, tells MHN. “Foreclosures are an indication of the weakness of a particular state’s/city’s economy, and this weakness extends to the rents as well. There are fewer people with good jobs, and people are now spending larger amounts of money getting to and from work.”Latham adds that it’s a myth that foreclosures result in increasing rents. “We just don’t see that anywhere. And, in fact, we see that several families dissolve as separate units and start living together in these times.”People affected by foreclosures are definitely not going into the world of large apartment complexes, she says. “Apartment owners and managers ask people where they are coming from and they are not coming from foreclosed properties,” she adds. The highest quarterly rate of rental increase, according to RealFacts, came in Tulsa at 3 percent. Oklahoma City also made the top 10 at 1.3 percent. Other top performers of the quarter include Seattle at 2.3 percent; San Jose at 1.7 percent and Salt Lake City at 1.6 percent.When rents are compared year over year, the list of winners is similar: Salt Lake at 10.4 percent, Tulsa at 8.8 percent and Oklahoma City at 8.3 percent. Other cities with increases of more than 5 percent were San Francisco (7.7 percent), Seattle (7.4 percent), San Jose (7.3 percent) and Portland (5.1 percent).“Seattle, San Francisco and Portland are doing well because of job growth, trade on the Pacific Rim with China and general economic successes. As for Tulsa and Oklahoma, they have benefited from the oil industry as well as some Californians moving to those cities for cheaper rents,” explains Latham.As for northern California, Latham says it’s recovering from the 2001 recession, with rents going back to what they were nine years ago.Occupancy trends for the surveyed quarter are ambiguous. Seventeen of the Metropolitan Statistical Areas (MSAs) showed some occupancy gain, while 14 were frozen or declined. Overall, average occupancy remained unchanged in the second quarter of 2008.