Even as Bay Area home values weaken, a new report shows rents are soaring - indicative of the curious mix of a sturdy economy and a faltering housing market.

Average monthly rents in the region’s financial and high-tech hubs have jumped more than 10 percent in the last year, and occupancy rates hover around 95 percent, according to a quarterly rental survey by RealFacts.

While robust hiring is boosting apartment prices, the purchase side of the market languishes amid the subprime crisis and a supply of homes for sale that far outstrips demand.

“We have very strong employment, and typically it increases demands for rentals and raises home prices,” said Michael Carney, director of the Real Estate Research Council of Northern California. “But because we’ve had these problems with the mortgage market, the shift is toward rentals.”

The average rent for an apartment in San Francisco stood at $2,243 in the third quarter, up nearly 12 percent from one year ago; in San Jose, the average rent also jumped 12 percent to $1,622, said RealFacts of Novato, which tracks rents in mostly large buildings across the nation.

Across the nine counties, the average rent in the third quarter was $1,539, up 9 percent from $1,411 twelve months ago.

In part, property owners say they see an influx of new hires from outside the region. In renting out 15 apartments in San Francisco in recent weeks, Raymond Scarabosio has not signed one agreement with a person who had a Bay Area cell phone number. Through Jackson Group Property Management, Scarabosio manages about 500 apartments in 90 buildings across the city.

Also, tighter lending standards pushed more would-be buyers out of the market, while others are waiting to see if prices slide.

“The fringe players have become renters again, and people who owned homes that are now in foreclosures are now renters again, too,” Scarabosio said.

That’s not likely to change in the near term, as many economists like Carney say it could be years before home values stabilize. If the economy can weather the housing downturn and Bay Area firms continue hiring, that could add more pressure to the rental market.

“Once home prices start to fall, they’re going to fall for a while … because people are waiting around trying to time it for the bottom,” Carney said. “Assuming the economy stays the way it is, the demand for rentals will remain quite high.”

Jamie Fougner, a commercial mortgage broker in San Francisco, is feeling the squeeze. For a few months, he’s been staying with a friend in the West Portal neighborhood. But with his girlfriend scheduled to move here from Minneapolis next month, he’s desperately trying to find an affordable place that will accommodate the couple and their 10-year-old Australian cattle dog.

A few years ago, after the dot-com implosion, landlords welcomed pets if it meant filling a vacant apartment. But Fougner, in his mid-30s, said online apartment searches turn up few that allow pets. Even then, he said, prices are usually at the very high end of his range - around $2,500.

Meanwhile, he has stopped going to open houses; even when Fougner would show up 15 minutes early, he found five or six people waiting.

“We might just end up getting a spot for $2,400 or $2,500 (a month), which will just make me sick every month writing that check,” Fougner said. “But if it’s not a dump and has a patio, then we’ll want to stay home more anyway.”

Source:

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/10/18/BU36SRH4D.DTL&hw=real+estate&sn=005&sc=498