State

Vacancies in Modesto among highest in state

Apartment rental prices are down, vacancies are up and tenant credit-worthiness is declining, analysts report.

Rental prices across California fell 4.5 percent this spring compared with the same period last year, according to research firm RealFacts.

While Stanislaus County rents have remained fairly flat, vacancy rates in Modesto and Merced apartment complexes are among the highest in the state.

Fewer than 90 percent of Modesto apartments had tenants this spring, compared with about 94 percent a year ago and nearly 96 percent two years ago.

"It's definitely not going in a good direction," said Georgina Bockel, a West Coast consultant with RentGrow, which provides tenant screening services.

Bockel said occupancy rates of 93 percent to 97 percent are considered healthy for apartments, and anything below 90 percent is not good.

Merced occupancy rates also dipped below 90 percent this spring. Compare that with 2001, when more than 99 percent of apartments were full. Occupancy levels have been dropping since, according to RealFacts records.

It's not that rents in the region are high. The average California apartment dweller paid $1,382 per month this spring. Those in Modesto paid just $817, Turlock tenants paid $813 and Merced $732.

Northern San Joaquin Valley rents barely moved during this decade's real estate boom and subsequent housing bust.

More than 43,000 homeowners lost their houses to foreclosure in Stanislaus, San Joaquin and Merced counties the past three years. But relatively few of them appear to be renting apartments in the region.

Many of those foreclosed houses, in fact, have been purchased by investors and turned into rental homes. Those rentals now compete with apartments for tenants.

Apartment tenant applications nationwide have declined, according to a recent RentGrow report.

"The theme for the last 12 months has been lower year-over-year traffic by 10 to 20 percent, with some (apartment complexes) reporting traffic declines of 25 percent or more," RentGrow reported.

And prospective tenants are not as creditworthy as they used to be.

"On average, the applicants visiting leasing offices this year have weaker credit profiles than last year, continuing a trend that began in 2007," RentGrow found. "The U.S. economy has shed 5 million jobs in the past 18 months, and the foreclosure and banking crises have weakened the financial profiles of many individuals."

Bockel said apartment managers face the challenge of finding good tenants when applications are down and those who do apply aren't as financially qualified.

"They must look at their criteria (for screening tenants)," Bockel suggested. "Their scoring systems can be tweaked to increase occupancy rates."

Among the changes that RentGrow suggests landlords consider:

Adjusting deposit levels for marginal credit profiles

Adjusting the number of years that credit items are scored

Removing foreclosure items from scoring

Removing medical debts from scoring

Adjusting rent/income ratio criteria

Bolstering the tenant decision process with supplemental or alternative applicant data, such as civil court records and rental payment history records.

Bee staff writer J.N. Sbranti can be reached at jsbranti@modbee.com or 578-2196.

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