Apartment Occupancy Up as Home Market Sputters

Already-high apartment occupancy rates continue to rise slowly amid home foreclosures and fewer people qualifying for mortgage loans.

Apartment rents are expected to climb gradually but are still at a lower level, adjusted for inflation, than they were from 2001-08. Rents in Southern California rose at an annual rate of 1.2 percent in August based on the regional Consumer Price Index.

The average rental rate in the area is about $1,530. Orange County rents are up $59 a month from the fourth quarter of 2009.

Rents would likely be higher in a better economy, but job growth and stagnant wages have made it harder for most workers to pay them. Still, experts say rents have more room to rise because they're cheaper than the average monthly payment for a home, which runs about $2,100.

Meanwhile, home sales are not expected to pick up significantly for at least three years.

That means more people are looking for apartments and, with the Orange County occupancy level already at 95 percent, renters are finding fewer choices. In some cases, complexes have only upstairs apartments available. And apartments that are pet friendly or have closed-in patios are going fast.

The Orange County occupancy rate is up slightly from 94.3 percent in the second quarter of 2010, according to apartment tracker RealFacts. The county’s occupancy rates have averaged 94.9 percent since 2001.

Fountain Valley continues to have one- and two-bedroom apartments advertised from about $1,300 to $2,500 a month with a fair number of two-bedrooms around $1,650. Examples, posted in ApartmentGuide.com, include Serena Vista Apartments, where one- and two-bedroom units are advertised at $1,245 to $1,615.

Corta Bella has one- and two-bedroom apartments listed from $1,345 to $2,451. Fountain Park Apartments has two- and three-bedroom units priced from $1,312 to $2,277.

RealFacts reports that the city of Westminster was kindest to renters during the second quarter of this year. Rents there actually fell by $33 a month (2.5 percent). In contrast, Santa Ana had the highest jump with rents up $113 a month (8.8 percent) during the second quarter.

Garden Grove had Orange County’s highest apartment occupancy rate with just 2.9 percent vacant in the second quarter.

For investors, apartments could remain a good gamble for years to come. Hessam Nadji, a managing director at Marcus & Millichap Real Estate Investment Services, said in a GlobeSt.com article that he expects a high-demand apartment rental market until at least 2014 to 2015. It’s expected to take that long for construction of new apartments to catch up with demand.

As a result, apartment sales volume reached $25 billion during the first half of 2011, up 67 percent from the first half of last year.