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Page 1 of 2 Apartment market poised for recovery
(July/2010) … As the 4th of July, 2010 holiday approaches things seem to be changing rapidly. The economy cannot seem to decide whether it is in a recovery or whether it is double-dipping. Economists cannot decide whether we will see inflation or deflation. The housing market seems to be going through withdrawals after Washington let the tax credits expire and historically low interest rates due to the flood of money buying US Treasury bonds do not seem to be enough to jumpstart mortgage lending. As landlords, we are trying to relate all these questions and concerns, and more, to our business of providing rental housing at a profit. The overall question we need to ask ourselves is whether or not we think history will repeat itself, because if it does we are right on track.
At the RHANAC Investor Expo this past March when the results of our annual rent and vacancy survey were presented to the attendees I made the following predictions for 2010:
- Gradual improvement in the rental market due to improving job growth
- Rents may drift down but the worst of the rental market is behind us
- Vacancies should become easier to rent as job growth improves
- Watch for possible double dip in job growth if the Fed and Treasury withdraw stimulus
Bay Area Job Growth
January 1998 through May 2010
(Click chart to see larger image)
Job growth in the Bay Area continues to support the top three predictions. RHANAC’s market conditions committee, which I chair, tracks job growth on both sides of the Bay and the graph lines are still spurting north in a V-shaped recovery (see graph through May 2010).
Clearly the worst of the job market is behind us which historically means that the worst of the rental market is behind us, too. When both graph lines cross the zero percent line and jump into positive territory our rents should go up if history repeats itself. In the meantime both lines still indicate negative job growth which means that rents could drift down a little until we get positive job growth.
The East Bay added jobs in May, San Francisco/Peninsula has added jobs for three consecutive months and the San Jose/Silicon Valley area has added jobs for six consecutive months starting last December. Job growth compares total jobs per month with the same month one year prior. That is why we can be adding jobs but still have negative job growth. My last column mentioned that some of these job gains were temporary census workers and we will have to wait a few months to see how the employment figures are impacted when the census work is complete.
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