Apartment rents are falling, even as the supply of available units shrinks, suggesting that the recession is depressing the market, according to the Fall 2008 Vacancy and Rental Rate Survey by the San Diego County Apartment Association.
“We’re all feeling the effects of the economy,” said Linda Morris, president of Cambridge Management and the 2008 association board president. “Costs for water, sewer and trash services continue to rise, but it’s hard for property owners to recover these costs as household budgets tighten.”
The countywide vacancy rate this fall fell to 3.6 percent, down 1.2 percent from the spring, but slightly higher by 0.2 percent compared to fall 2007.
Average weighted rent for all unit types fell to $1,188 this fall, down from $1,201 in the spring, but 1.7 percent higher on the year.
The Apartment Availability Index, which measures vacant units and units with notices to vacate, has decreased to 5.98 percent, from 10.25 percent last spring.
Lower vacancies suggest that there is not a mass exodus of renters buying foreclosed homes, according to the apartment association.
“Last spring, we saw an increase in vacancies due to an increase in the supply of foreclosed homes being rented (out). Now it appears that those units are being absorbed and vacancy rates are returning to where they were a year ago,” said Robert Pinnegar, the association’s executive director.
The survey covers all rental housing, from single-family homes to communities in excess of 100 units. Properties less than 6 years old reported the lowest vacancies, followed by properties more than 25 years old and then properties between 6 and 25 years old. Past surveys have reported higher vacancies among the newer category of properties, so this reversal could be due to unsold condo units being converted to rentals.
Real estate has been in flux for two years. The “reconversion” of condo conversions to rentals in early 2007 was the first supply wave to increase vacancy rates. Then the addition of home foreclosures to the market added more rentals. The current recession and future foreclosures will also have an impact.
The apartment association’s fall 2008 Vacancy and Rental Rate Survey was mailed to more than 6,000 rental property owners and managers throughout San Diego County during the month of September and represents responses from more than 37,000 units.
, Ned Randolph
