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San Diego down $1 in 4Q

National, SD County apartment rents stabilize

Apartment rents that climbed both in San Diego and nationally early in the year flattened out or slightly decreased, as 2012 came to a close.

RealFacts reported that San Diego saw its average rental rate decline slightly, from $1,456 at the third quarter's end to $1,455 at the end of the fourth.

The picture looks quite different when looking at the year-over-year numbers.

San Diego’s $1,455 average in the fourth quarter 2012 was 4.5 percent higher than $1,393 during 2011's last quarter.

The Boulder, Colo. market posted the largest year-over-year rent increase at 10.8 percent to $1,173 at year-end 2012.

Albuquerque, N.M. had the least year-over-year change, climbing by only $1 to a $772 average -- or about half the average rent in San Diego County in the fourth quarter.

The greater San Jose area had the highest year-end average rent $1,954 per month.

At the other end of the spectrum, Tucson, Ariz. had a $644 average and Tulsa, Okla. had an even lower $631 average at year-end.

Nationally, the average rent which increased from $1,008 per month to $1,029 in the second quarter of last year climbed to $1,042 in the third quarter, before dropping slightly to $1,040 per month at the end of 2012.

“What has changed in the past quarter? Demand for single family housing,” RealFacts wrote “Statistics confirm a more robust for-sale housing market is now emerging --recovering from its long hiatus ever since the subprime mortgage crisis struck down our global economy in 2007.”

“Where there was once a bloated inventory of houses for sale with many homeowners losing homes to foreclosures or opting for a short sale to avoid foreclosure, new listings are now fewer and far between,” the report continued.

RealFacts contended record low interest rates currently hovering at 3 to 3.5 percent have only fueled the demand for for-sale housing to the detriment of apartments owners.

“How we confirm that rents have hit the wall is by examining primary market leaders of the recent past like San Francisco and San Jose,” the report stated.

“For the past several quarters, those markets leaders have experienced a slight but consistent decrease in occupancy rates, which is an early indicator of rents.”

RealFacts reported that vacancy rates show mixed results, with half the markets on the rise and the other half declining.

San Diego’s 4.6 percent vacancy rate at year-end 2012 was down from a 4.8 percent a year earlier.

Moderating rents may increase occupancy here and in other parts of the country, but the report stated this will only happen if there isn’t a glut of new apartments.

Russell Valone, president of San Diego-based MarketPointe Realty Advisors, said while there are some large complexes coming online -- such as 1,800-unit Casa Mira View in Mira Mesa, and 533-unit Carmel Pacific Ridge on the former University High School site in Linda Vista -- they are being phased in to prevent a glut.

Valone said developers such as Casa Mira View builder Garden Communities and Carmel Pacific Ridge co-developer The Irvine Co. -- in conjunction with Carmel Partners -- have careful formulas to determine just how many units will be needed, given projected demands.

In the meantime, RealFacts noted people are being drawn into for-sale housing by low interest rates and other incentives, while stating that everything depends on the jobs picture.

“Will there be enough of an increase in newly created jobs in 2013 and are those jobs paying enough for people to feel secure about affording a place of their own?” RealFacts asked in its report.

Valone said if people are living in complexes that were constructed prior to 2000, the span from renting to owning may be a bridge too far.

Valone said those who are living in rental properties originally built as townhomes may be ready to make the move into single-family housing.

“There are a number of those that the builders decided to turn back into rentals,” Valone said, adding that fractured condominiums were part of this mix.

Rents may have flattened recently, but demand for well-located apartment complexes has continued to be strong.

The vast majority of the apartment sales are for 10 or fewer units, but there are some exceptions.

In late December, a San Francisco-based Jackson Square Properties partnership paid $77 million for the 223-unit Terra Nova Villas on East H Street, and the 183-unit Canyon Villas on Telegraph Canyon Road; both are in Chula Vista.

The $8.95 million sale this month of the 17-unit In Eden development at 600-616 Prospect St. in La Jolla wasn’t large in terms of the number of units, but at $526,471 per apartment it was one of the most expensive per-unit costs seen in the county last year.

In mid-December the 104-unit Peppertree Ranch Senior Apartments at 8956 Harness St. in Spring Valley sold for $8.45 million or $81,250 per unit to a unit of Wasatch Advantage Group, LLC of Mission Viejo.

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