Region's rental market stagnant for a third yearBut investment analyst sees shift ahead in favor of the landlords
By Jim Wasserman -- Bee Staff Writer
Published 2:15 am PDT Thursday, April 20, 2006
Story appeared in the Business section, Page D1
Once again, it's still a renter's market. But just how long that continues is now open for debate.
For the third year in a row, rents in El Dorado, Placer, Sacramento and Yolo counties have remained largely unchanged, rising in the past 12 months just $13 to an average of $929, a new landlord survey shows. From the first quarter of 2004 to the same period of 2006, average capital-area rents have increased only 3.1 percent, according to the survey.
What's good news, though, for the 35 percent of the region's population that rents is hard on investors who normally bank on increases of 5 percent to 6 percent a year.
The Sacramento area's slim rise in rents contrasts with those in other regions around the state and in the West. Average rents in Riverside and San Bernardino counties rose 7.3 percent in the past year to lead the state. Rents in Los Angeles, Phoenix and Las Vegas jumped at least 6 percent.
The RealFacts analysis of apartment communities in the four-county Sacramento region shows first-quarter 2006 rents edged up $3 from the fourth quarter of 2005. The average occupancy rate, too, largely was unchanged at 92.7 percent, compared to 92.8 percent at the end of last year.
Typically, apartment owners prefer an occupancy rate of 95 percent to 96 percent. In early 2001, area landlords were clearly in the driver's seat with 97.7 percent occupancy rates, according to RealFacts.
The Marin County firm's first-quarter 2006 figures show that while rents increased slightly in Sacramento, Davis and Roseville in the past year, they fell almost 5 percent at nine apartment communities surveyed in Elk Grove and five in West Sacramento. That typically indicates more supply than demand, Bates said.
Rents also fell slightly across the past year at 18 complexes surveyed in Rocklin.
But the sustained favorable cycle may be winding down for renters accustomed to deals and move-in incentives such as a month's free rent.
Marc Ross, an associate with CB Richard Ellis' local investment properties division, described the past six months as "the last little hint of an oversupply scenario." The region added 4,000 apartments in 2004, he said.
Ross predicts the area's strong job growth and long slowdown in apartment construction will spur more increases in occupancy and rental rates during the next 12 to 18 months.
"We're trending slowly back to equilibrium," he said.
The RealFacts survey showed that though Sacramento-area rents are stable, they're still higher than in many similar-sized metro areas across the West, including Seattle, Portland, Denver, Phoenix and Las Vegas.
The Los Angeles area is still California's most expensive for renters, with average rents at $1,484, according to the survey.
About the writer: The Bee's Jim Wasserman can be reached at (916) 321-1102 or email@example.com
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