Rental market alive and well

(September/2010) … As we head towards the end of the year this Labor Day weekend of 2010, it appears that our rental market is alive and well despite the uncertainty of the general economy and the high unemployment rate.

With the onslaught of ultra-low interest rates on apartment loans, it should be only a matter of time before apartment investors jump back in the market. The fundamentals seem to be in place for a recovery in the apartment sale market, a stronger rental market, low interest rates and rising capitalization rates (falling prices). The only thing missing may be confidence that prices have not hit bottom yet.

Most recent economic recoveries in this country have been led by the real estate market. With the expiration of the government tax credits, it is obvious that the residential real estate business is not going to be the driver it has been in the past. The Federal Reserve printed over $1 trillion in an effort to offer low-rate financing for that recovery, with ultra-low fixed interest rates now available, and still the news on the housing market is not good. The unemployment rate is still way too high, the government recently revised the GDP downward for the last quarter growth and there is talk of a return to recession.

Bay Area Job Growth
January 1998 through July 2010

(Click chart to see larger image)

Amazingly, despite all this bad news the rental market for our apartments is strong and the predictions made at the RHANAC Investor Expo last March have turned out to be correct, so far. Even the caution, “watch for possible double dip in job growth if the Fed and Treasury withdraw stimulus” has not materialized yet.

“Innovate Oakland”

Through July 2010 the job growth graph for Oakland/Hayward/Fremont and San Francisco/Peninsula continues in a v-shaped spurt towards positive job growth. San Jose/Silicon Valley is very close to positive job growth already.