A housing market that once danced to the beat of the double-digit home-price jump is giving apartment rents a whirl around the ballroom floor.
Showing form not seen since the first quarter of 2001 when rents last did a two step, Silicon Valley (Santa Clara County) rents rose 10.4 percent the third quarter, compared to the same quarter a year ago, according to Novato, CA-based RealFacts.
RealFacts said the average rent in Silicon Valley rose to $1,450, up from $1,314 a year ago, making the region the hottest metro area RealFacts tracks.
RealFacts keeps tabs on more than 12,000 rental communities of 100 units or more in nearly three dozen metros in 15 states, most of them West of the Mississippi River.
Among the hottest Silicon Valley apartment properties were those with starter rentals -- studios ($1,007), junior one-bedroom units ($1,105) and larger one-bedroom apartments ($1,296) -- all of which revealed average rent increases of more than 11 percent in the past year. As a group, the three types of units comprise more than 50 percent of the Silicon Valley database.
The average rent on larger, two-bedroom, two-bath town homes in Silicon Valley rose 12.1, percent to an average $1,828 a month, the largest percentage increase by rental type, RealFacts reported.
The rent rumba is in stark contrast to Silicon Valley's price limbo where the median price remains nearly 5 percent ahead of last year, but has been stripped of $51,000 in the last few months. Home prices rose from $733,000 in September of 2005 to $769,000 in September this year, according to Richard Calhoun, a San Jose-based Creekside Realty real estate broker.
Experts say the rent boom is bolstered by slow but steady job growth and newcomers unable to afford still high home prices. However, at the rate of rent increases, renters may soon reconsider.
"Both the landlord and the tenant are looking for six months to a year lease. Renters are thinking maybe prices will come down a bit and landlords are not looking for month-to-month leases," said Sylvia Hill. broker/owner of HMS Development, a San Jose-based property management company.
By city, San Jose, the county seat and largest city, saw rents rise only 8.4 percent to $1,377 compared to the greatest jump, 17.5 percent in Mountain View, where rents averaged $1,549 a month. The smallest increase was in Milpitas where rents rose only 4.1 percent, but with one of the county's highest occupancy rates (97.7 percent), the market commands rents that average $1,405 a month.
Elsewhere in the county, the highest rents were in Palo Alto, at $1,810 a month; Cupertino, $1,771 a month; and Los Gatos, $1,557 all towns with smaller statistical samples.
Elsewhere in the greater RealFacts' coverage area, the Los Angeles-Long Beach-Santa Anna, CA metro had a higher average rent than Silicon Valley, coming in at $1,546. Also, the Oxnard-Thousand Oaks-Ventura, CA metro's average rent was $2 higher than Silicon Valley's.
RealFacts says rent growth for its coverage area is now de rigueur and expected to continue well into 2007.
"Rent growth rates might even accelerate as the 'follow the leader' effect kicks in, and more conservative owners start to raise their rents as they see the success of the market leaders," RealFacts reported.
