Lease prices fell in nearly every market in the country between April and June, with an average decline in asking rents from $978 per month in the first quarter to $968 in the second. Areas including Tampa-St. Petersburg, FL, Kansas City, MO and San Antonio, TX, were minor exceptions, however, with modest upticks ranging from 0.6% to 1.2%.
The hardest hit markets during this period were ones with high concentrations of luxury properties, mainly in California, where apartments rent for an average of $1,000 per month. The San Francisco Bay Area, which is possibly the most expensive place to live in the US, saw its rents fall once again, following a similar drop in the first quarter.
The largest decline was in the San Jose metro area, with -3.8%. San Francisco and Austin, TX came in second and third, respectively, with rent decreases of 2.7% and 2.4%. Other markets seeing declines were also in California; Oxnard-Thousand Oaks and the Riverside-San Bernardino regions each fell by 1.8% and Los Angeles, by 1.6%.
RealFacts researchers note than the poll is a good indication of how the high unemployment levels have impacted the Sunshine State; the unemployment rate as of May 2009 was 11.5%, nearly 200 basis points higher than the national average of 9.4%. The declines are attributed to the loss of several positions in the high-tech field, including layoffs by such firms as Yahoo Inc.
There is, however, a silver lining. After declining rapidly in the past few quarters, occupancy is beginning to hold steady. The stability in vacancy is also a good indication that rental rates are beginning to normalize. One market that showed a decrease in rents from $1,551 to $1,473, Oxnard, CA, actually saw its occupancy rise by almost a full percentage point during the quarter. Similar stories can be found in Orlando, San Francisco and San Jose, which saw occupancies tick up by 30 to 60 basis points.
Unfortunately, all other regions saw more empty units, with the greatest drop in Boise, ID or 3.2%. Oklahoma City and Indianapolis followed soon after, with -2.1% and -1.4% occupancy growth.
The bottom line for landlords these days is that renters are less willing to dig deep into their pockets for digs. "There aren't enough high income renters with good credit to commit to premium rents prevalent in high-end markets," RealFacts analysts note. Further, many renters have been forced out of high-priced markets due to lack of employment opportunities or sufficient income. And, sometimes, renters just opt to move to a less expensive housing market, where they can pay significantly less for a similar quality unit.
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