Newport rentals the highest in O.C., study says

In the wake of a somewhat stagnant real estate market, rental prices continue to increase in Newport-Mesa, with Newport Beach rated as having the highest rent in Orange County, according to statistics released by RealFacts, a data analysis company concerned with the rental market.

Costa Mesa is not far behind, taking the No. 4 spot on the list. Separating the two are the cities of Irvine and Aliso Viejo.

Despite the limitations in the study — it only looks at large apartment communities with 100 or more units — it seems relatively consistent with what is happening at every level.

The average monthly rent in Newport Beach is $1,936 and in Costa Mesa it’s $1,523. Orange County’s average rate is $1,494.

The explanation for the high monthly rents is simple supply and demand. Not many new rental properties are being built, especially in Costa Mesa where 60% of residents are renters. Occupancy levels in each city are above 95%, which means it’s relatively easy to fill units quickly. Managers at Irvine Co.-owned apartment communities are having no problems filling their large and often luxurious communities, said Irvine Co. spokesman Bill Rams.

More jobs are being created every year, bringing more people to the area, said Joseph DeCarlo, president of Costa Mesa’s JD Property Management and professor of property management at Coastline Community College. DeCarlo manages about 3,000 rental units throughout Orange County.

With lower unemployment rates, higher interest rates and inflating incomes, mainly in Newport Beach, more people are attracted to the area.

According to the U.S. Census Bureau, the median household income of Newport residents has grown 16% from 1999 to 2005.

Costa Mesa’s median household income has only grown 5% and still doesn’t hit the income made throughout Orange County, perhaps explaining why the number of homeowners is less than renters.

Properties with high-end amenities — such as exercise rooms, hot tubs and others, as most Irvine Co. properties have — can get higher prices.

Many Costa Mesa rentals are privately held and housed in older buildings with smaller numbers of apartments. They require renovations and maintenance, which can be costly. But many apartment owners do not want to raise rent for fear of not being able to keep their units filled, DeCarlo said. But if they don’t spend the money on the upkeep, the fear is the same. Many times, owners end up losing money on their investment, DeCarlo said.

“When we collect the rents on the tenants, we pay the bills, including the mortgage. Many times we don’t send them a check because there’s a negative cash flow each month,” he said. “After a while, they get tired of that.”

Rents have not gone up as much as home prices in the last five years — another reason why people continue to rent. It’s cheaper to pay rent than a mortgage with high interest rates, DeCarlo said.

Perhaps distressing to renters, DeCarlo expects rents to continue on the upward trend, which may help owners make some return on their investment.