Fresno, Clovis rental market revives
Two apartment complexes opening in Fresno and Clovis this month are commanding rents that can exceed the cost of a monthly mortgage — a sign that after years in the dumps, the local rental market is on the upswing.
Two factors are fueling the surge. One is a market flooded with not only the typical tenants — the young adults itching to get out of their parents’ homes — but also by people wary to commit to a mortgage, and former homeowners still recovering from foreclosure and short sales.
Fresno real estate analyst Robin Kane of RCK Organization said the typical consumer still hears about mortgage problems and is going to be hesitant to step into the homebuying market.
For those who stay on the buying sidelines but can afford high-end rents, what’s left is an aging apartment sector that has been dormant for nearly three years, excluding the lofts and townhomes built in downtown Fresno serving a niche population.
Three-quarters of Fresno’s apartments were built in the 1970s and 1980s. Only 5% of the area’s apartments are relatively new — built between 2000 and 2009 when construction of all types was booming in Fresno and Clovis.
Tight lending restrictions and rents too low to turn a profit kept developers from building anything new since 2009, when the apartment market hit a low point in occupancy.
Back then, tenants tended to double up with friends or return home to live with family to save money, said Adam Goldfarb, vice president of multifamily at Manco Abbott Inc., a Fresno property management company. And apartment owners and managers were lowering rents or making concessions like a month of free rent or a $500 off move-in special to attract tenants.
But a small improvement in the job market in recent months, increased optimism among young people and a credit crunch still affecting the ability of some people to get a mortgage loan are making those specials a thing of the past.
Occupancy is back up and potential renters are back on waiting lists, something not seen since 2007, said Dan McCoy, a property supervisor at GSF Properties in Fresno.
The apartment vacancy rate in Fresno improved from 6.4% in 2009 to 3.7% at the end of last year, according to an analysis by real estate research firm Reis Inc.
“We are less dependent on promotions than we were two years ago,” McCoy said. “Our prices had to adjust to meet where the market is and we’re starting to recoup our losses, so we’re on the better end of [the market] now.”
At least two new apartment developments are going up and the owners of older apartments have invested millions of dollars in renovations.
Today’s renters “want more social interactive centers, free Wi-Fi,” Kane said. They want smaller bedrooms and bigger entertainment areas like great rooms found in houses. And they are looking for pet-friendly facilities, he said.
One of the new developments is The Shires, 122 units at Cedar and Nees avenues. The Penstar Group, a Fresno real estate development and construction company, is building it and wasn’t shy about asking for premium rents: $1,200 for a one-bedroom, 900-square-foot apartment, up to $1,550 for three bedrooms and 1,400 square feet.
“There is a demand for apartments, especially upscale or large units,” said Leta Ciavaglia, project manager for The Shires. “Our largest unit is 1,500 square feet. It’s pet-friendly and in the Clovis school district, so based on those factors it’s a win for us.”
The Shires already has two signed leases and a short waiting list. Goldfarb at Manco Abbott said he gets at least 20 calls a week about the property, which is expected to open at the end of the month.
Another development expected to open at the end of the month also has a waiting list. The Fountains at Alluvial by Fresno-based Ginder Development Corp. is for people ages 55 and older. Rents range from $1,125 for a 900-square-foot unit to $1,700 for a unit just over 2,000 square feet.
The demand for new rentals is good news for apartment owners and developers considering how cheap it is to buy a home of similar size in the neighborhood.
The mortgage on a three-bedroom house listed for sale at $165,000, for example, could pencil out to be about $1,149 a month under a 30-year fixed-rate Federal Housing Administration loan at a 4% interest rate with a 3.5% down payment, according to Will Youpel, a Century 21 real estate agent.
The mortgage payment would be much less — about $888 a month — if a buyer put down 20% on a conventional loan, he said.
Steve Buckley pays $1,300 a month to rent a two-bedroom 1,600-square-foot condominium at Birch Commons in northeast Fresno. It’s about the same as the mortgage he once paid on a smaller three-bedroom house he owned in northwest Fresno.
But when the economy went downhill and home values plummeted, the Rabobank senior special assets officer decided to sell his house and rent instead.
“You’re at much more risk losing money on your home or having to fit your lifestyle into the home you purchased, so that’s where I think it’s much more advantageous to rent because of the home market,” he said.
Buckley, 38, is single and doesn’t want to get tied down with a mortgage if his job requires him to relocate.
“I make plenty of money and I could purchase a home if I wanted to, but it’s one of those situations where the housing needs that I have right now are uncertain.”
By BoNhia Lee