Bay Area apartment rents are rising at nearly double-digit annual rates and have reached record levels, according to a report released Tuesday, prompting some analysts to warn that the region's economic boom could be choked off by the relentless rise.
Asking rents averaged $2,043 during the first quarter of this year, the study by RealFacts determined. That's a 9.9 percent increase over the same January-March period of 2013. An array of rental units were surveyed, including studios; one-, two- and three-bedroom apartments; and townhouses.
"We are seeing more apartment product being constructed, and even with the new units coming on line, rents are still trending upward," said Nick Grotjahn, a spokesman for RealFacts, which tracks the real estate market.
Among the Bay Area's three largest cities, San Jose had an average asking rent of $2,066 during this year's January-March quarter, up 10.3 percent from the same period last year, RealFacts reported. Oakland had an average rental rate of $2,187, up 12.3 percent, while San Francisco posted an average of $3,057, up 9.5 percent.
Experts say the main cause of the rising rents is that the area's red-hot job market is outstripping housing construction.
In the South Bay, for example, the total number of jobs is increasing at an annual rate of 4.4 percent -- making Santa Clara County the fastest growing job market in the country. The Austin-Round Rock-San Marcos region of Texas was a relatively distant second with a 3.9 percent growth rate.
Residential rents in the Bay Area have been rising at double-digit rates for about three years, and the current average rent of $2,043 is an all-time high for the region, according to an analysis by RealFacts.
"There was a sustained increase in rents during the dot-com bubble," Grotjahn said. "But this is the longest increase on record since the dot-com days."
"Absolutely insane" is how Jimmy Apodaca, of San Jose, described the local rental market. He makes about $80,000 a year and rents a 525-square-foot, one-bedroom apartment in a 25-year-old building in west San Jose for $1,665 a month.
"If I wanted a newer apartment, it would be impossible to pay less than $2,000 a month," Apodaca said. "You shouldn't have to make six figures to have a decent apartment here in the Bay Area. I feel sorry for young adults that have just come out of college and are entering the workforce."
Eliza Arakelian and her husband attempted to find a two-bedroom rental unit in San Jose to upgrade from their one-bedroom apartment in Los Gatos. But after checking the prices, she concluded that "It's just not in the cards," even though she runs a small business and her husband, Dominic, is an attorney.
"It's so expensive now," Arakelian said. "It's borderline unbearable. Unless you're an engineer and have a job, San Jose is not the place to live anymore."
Scott Anderson, chief economist with San Francisco-based Bank of the West, said soaring Bay Area rents could eventually slow economic growth.
"Part of the strong performance of the Bay Area job economy is people are moving here to take new jobs," he said. "There is only so long that rents can go up a lot faster than incomes before people start to balk at that rental transaction and not migrate here for work."
Anderson said the only solution is for the Bay Area "to start building as much as we can."
Stephen Levy, director of the Palo Alto-based Center for Continuing Study of the California Economy, said the spiking rents cause pain across a broad spectrum of income levels.
"This is a major concern and it will become a problem for both people at the top end and people in the middle class," he said. "At some point, tech workers simply won't be able to afford to live here. They will move to Denver, Seattle or Texas. In the middle, you need teachers, firefighters, carpenters and plumbers to provide services for people in the area. And they won't be able to afford the Bay Area."
Contact George Avalos at 408-859-5167. Follow at twitter.com/georgeavalos.