January 21, 2010
Now at a 3-year low, Silicon Valley apartment rents have come down 11.5% from Q4 of 2008. The numbers are derived from an analysis of 426 complexes comprised of more than 78K units.
Large complexes in Santa Clara County were 94.7 percent occupied last quarter, up slightly from 94.5 percent in the third quarter and down slightly from 94.8 percent at the end of 2008. The recent peak for occupancy was in the first quarter of 2008, at 96.5 percent. Bridge said landlords typically feel they can raise rents when their units are at least 95 percent full.
Though unemployment and drop in incomes is to blame, another reason why rents have fallen as much as they have is the cost of living in the region. Because it is so high, people can afford to stick around for shorter periods of time, leading to higher vacancy. The other side of the coin is that while rents are suffering now, we will likely experience a good run up when things come back. The question is when that will happen.
Another reason is the the depressed housing market and relatively easy FHA loans (3.5% down, with up to 3% assistance from sellers), combined with tax credits. This has allowed a lot of renters to become owners, dumping even more supply on the market.
[via Mercury News]
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