Tuesday, June 06, 2006

Rents to Rise in Sacramento?

From the Sacramento Bee:

Bring on the moving vans. Renters rule the market -- at least for now. Unlike their counterparts in many apartment markets across the country, Sacramento-area renters have dodged fast-rising prices and a growing shortage of rentals. In fact, the region has become one of the nation's most stable for renters and some still get move-in incentives. But don't count on it lasting much longer...

A significant factor for demand gaining on supply: mortgage rates. They're at four-year highs amid lofty home prices, and freezing out scores of would-be buyers. Likewise, a mounting standoff between buyers who want dramatically lower prices and sellers not ready to offer them is bottling up even more people in rental units.

"We're hoping prices are going to drop in a while," said renter Robine Anderson of Citrus Heights. "It's cheaper right now to rent than to buy so we can save more money for a down payment." Even with 11,344 homes in the four-county region for sale in April, Anderson and her husband expect to rent until sometime next year. "Personally, I'm just kind of waiting for things to even out a little bit and get a good deal," she said. "We're just trying to be sensible about it."

Market-rate apartment construction and investor interest have stalled amid stagnant rents and rising building costs. Builders plan only 384 new market-rate apartments in the four-county area next year, compared to 3,500 in 2004, says a local analysis by CB Richard Ellis Inc. Complicating that supply forecast, however, is a growing supply of homes being rented while owners try to sell them.

El Dorado, Placer, Sacramento and Yolo counties continue their rapid growth, adding at last count more than 32,000 people and 22,000 jobs yearly.

More owners are now missing mortgage payments, a phenomenon expected to push more owners into foreclosure sales and back to renting. In recent years up to three-fourths of area buyers have used adjustable rate mortgages, and many struggle now with rising payments tied to interest rate increases...

The Sacramento area's average rent climbed 3.7 percent, YieldStar reported, compared to more than 6 percent in Los Angeles and Oakland and 9 percent in San Jose and Phoenix. Southern California rents are expected to climb another 5 percent to 7 percent this year amid a vacancy rate of just 3 percent, according to a recent Casden Real Estate Economics Forecast compiled by the University of Southern California.

5 comments:

Rocklin Renter said...

I have been thinking this for a long time now.

It only makes sense, but how many of these folks will end up in rental houses and how many in apts/condos.

Homeowners tend to have baggage - kids, pets, lots of junk. Most landlords I know of don't like that, especially pets (even though kids usually do way more damage). I see many people taking a big step backwards and heading to apartment life once again.

Should be a boom for storage units and apartment communities alike...

Happy in SF said...

Hmmmm, rents could go up I guess. But hasn't anyone noticed that rents have already just about doubled in Sac in the last 5 years? Seriously, I know someone who moved into the same unit in a building at 15th and G St. that a friend of mine rented in the late 90's for $400.00, my friend who moved in was paying $900.00. Rents are already at what mortgages should be and if this crash happens as so many are expecting, why would somebody pay more that say, $1,200 to rent a house when the price of ownership has come back down to that level for a fixed rate mortgage. It just doesn't add up to me. Sure, rents are a "bargain" compared to owning now, but don't forget that rents are also over inflated as well, this aint the Bay Area folks!

Gwynster said...

my comments to the Sac Bee article:

"The majority of people migrating into CA in the last few years have been unskilled workers. Many people are moving out of the area and local employers are finding it very hard to attract talent. I'm not sure how property managers propose to raise rents on a population that can barely keep it's economic head above water. For example, UCD is struggling to retain faculty and staff due to low wages and soaring housing costs."

Anonymous said...

I've lived here for over 6 years (Folsom), and with the exception of 2000-2002, my rent has stayed the same or gotten cheaper. Apartment complexes are still offering incentives, and they still have a high vacancy rate. Also, there are a large number of rental houses here that rent for less or the equivalent of a high end apartment. I've figured that apartments tend to rent for about 75 cents to $1 per square foot and houses tend to rent for 50 cents to 75 cents per square foot (the larger the house, the less the price per square foot). You will see advertisements where people are trying to rent for more than this, but they aren't in touch with the rental market, and these houses tend to sit empty until they lower their asking rent.

Anonymous said...

My parents havn't raised my rent in 5 years.