San Jose, CA Rents On Decline…But the Best time to buy?

A recent nationwide study of rents and occupancy, conducted by RealFacts
for 2Q09, reveal that renters are showing resistance to paying a premium
to rent an apartment in a high-end market.

Rents were in decline in every market nationwide in the current quarter
with the exception of a few modest increases in Tampa-St Petersburg, FL at
1.2%; Kansas City, MO at 0.7% and San Antonio, TX at 0.6%. On average,
asking rents are down nationwide in the second quarter of 2009 from
$968/mo.over first quarter at $978/mo. The markets that were hit the
hardest this quarter are high-end markets such as those found in the
Golden State. The San Francisco Bay Area, usually ranked as the most
expensive place to live in the country lost some of its luster this
quarter. The current quarter’s decline comes upon the heels of similar
losses sustained in 1Q09.

The San Jose MSA posted the greatest decline for the current quarter at
-3.8%, followed by San Francisco at -2.7% and Austin, Texas at -2.4%.
Other struggling markets are Oxnard-Thousand Oaks at -1.8%; Riverside-San
Bernardino, CA at -1.8% and Los Angeles at -1.6%. With the exception of
Austin, TX what these markets have in common is that they are located in
California and their average rental rates are over $1,000.00/mo.
The RealFacts survey demonstrates the effects of higher than average
unemployment statistics in the state of California. According to a May
2009 survey released by the EDD, California’s unemployment now stands at
11.5%, compared to the National average of 9.4%. The San Francisco
Business Times reported that the San Francisco Bay Area has lost 130,000
jobs from May 2008 to May 2009. Companies such as Yahoo! Inc.,
headquartered in Silicon Valley have had to make cuts of about 10% of its
regular staffers.

On the brighter side of the rental markets are the current occupancy
rates. The rate at which occupancy has been declining in the past two
quarters has slowed down in the second quarter of 2009. This suggests that
asking rents are beginning to reflect what the market can bear. For
example, in Oxnard California, the average rent went from $1551/mo. down
to $1,473/mo. But the occupancy rate actually increased by nearly 1.0% in
this same quarter. Other markets that posted positive absorption this
quarter were Orlando, FL, 0.6%, San Francisco, 0.4% and San Jose at 0.3%.
All other markets were down. The highest drop in occupancy for the quarter
was found in Boise, ID at -3.2%, Oaklahoma City, OK at -2.1% and
Indianapolis, IN at -1.4%.

It’s seems today’s renter is looking for a bargain. There aren’t enough
high income renters with good credit to commit to premium rents prevalent
in high-end markets. Many renters have been forced out of high markets due
to lack of employment opportunities or sufficient income. In some cases
these renters decide to move to a location where housing is less expensive
and where they can rent the same quality apartment unit for less than half
the price.

Source: Real Facts