California experiencing ups and downs in rents
SAN FRANCISCO Reflecting the regional divide in the state's economy, San Francisco Bay Area apartment rents are steadily descending from the dizzying heights reached during the dot-com boom while Southern California rents continue to climb, according to a quarterly research report released today.
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Monthly rents in the heart of the Silicon Valley the San Jose metropolitan area are falling even faster, plummeting 13 percent from their record highs early this year to $1,690 in September.
In contrast, Southern California apartment rents are on the rise, although they remain far cheaper than in the Bay Area.
In the Los Angeles metropolitan area, September rents stood at $1,222, up 4 percent from the end of 2000, RealFacts said. In the San Diego metropolitan area, average rents gained 5 percent over the past 9 months to $1,075 while rents in Orange County edged up 3 percent over the same period to $1,204.
The firm's quarterly survey covers 3,400 apartment complexes in California.
The firm also studied average rents at 2,100 other apartment complexes outside California in 11 metropolitan areas scattered throughout the West and Southwest: Phoenix; Oklahoma City; Boise, Idaho; Salt Lake City; Portland, Ore.; Albuquerque, N.M.; Reno, Nev.; Las Vegas; Denver; Colorado Springs, Colo., and Seattle.
The rents in the markets outside California underscore the challenges that employers statewide face when they try to attract workers from other parts of the country. The disparities also illustrate why some California workers in relatively low-paying professions, such as teaching and public service, are leaving the state for cheaper housing markets.
The average rents in all the major metropolitan areas nearest to California remain well under $1,000 per month.
In Phoenix, for instance, the average monthly rent in September was $707, just $9 higher than at the end of 2000. Even high-paid Silicon Valley workers can make their money go further in the technology-rich Seattle metropolitan area, where the average rent was $871 in September, up 5 percent from the end of 2000.
The search for cheaper housing also is helping to propel rents in fast-growing areas outside the Bay Area and Los Angeles. In Sacramento, September's average rent of $831 represented an 8 percent increase in nine months.
In Southern California's "Inland Empire" Riverside and San Bernardino counties the average rent has increased 11 percent over the same period to $833, according to RealFacts.
The contrasting directions of rent rates in the Bay Area and Southern California stem from differences in the regional economy.
While the Bay Area has suffered from a deep slump in the tech industry most of this year, Southern California has held up reasonably well, although the Sept. 11 terrorist attacks threaten to hurt the tourism and international trade industries in Orange and Los Angeles counties
"We are holding our breath down here, hoping the shoe doesn't drop on us, too," said Jack Kyser, chief economist for the Los Angeles Economic Development Corp.
After venture capitalists poured billions of dollars into Internet businesses in San Francisco and the Silicon Valley, dot-com companies launched a hiring spree that showered big salaries on workers scrambling to find a place to live. The frenzied demand enabled Bay Area landlords to impose huge rent increases.
When the dot-com bubble burst last year, employees began to move out of the area, forcing landlords to lower their asking price. The Bay Area rental market is cooling off faster than the ownership market, which is receiving a boost from a sharp drop in mortgage rates.
A mid-priced home in the Bay Area sold for $476,000 in August, the most recent statistics available from the California Association of Realtors. That represented a 1.3 percent increase from the end of last year.
Even with the recent reductions, the average rent in San Francisco is still higher by $344, or 23 percent, than at the end of 1999, according to RealFacts.
"No one should feel sorry for landlords here," said Gerald Cox, a RealFacts spokesman. "You can't wipe out the money that they made in the last few years. It's been a very good time to be an apartment owner.