It seemed for a long time like one of Frank St. Clair's Bakersfield apartment complexes would never fill up. But these days it's completely occupied.
Consider it a sign of the remarkable conditions facing Bakersfield multi-family housing market, where average vacancies have fallen to the almost unthinkably low rate of about 2 percent.
"Our vacancy rate is almost to the lowest point that I can remember in at least the last decade or longer," said St. Clair, a local real estate investor and broker.
The reasons for the tight market are not surprising: High regulatory and construction costs have all but prohibited apartment developers from building new projects in Bakersfield. Plus, homes that had been rented out are now being occupied by their owners, increasing competition for other rentals.
What is a little shocking is how the situation has enticed investors in local apartment buildings.
The average, per-unit sales price of multi-family housing properties in Bakersfield climbed last year to a whopping 17.8 percent year over year. That's "pretty staggering," said real estate agent Mark A. Thurston, senior vice president of ASU Commercial, whose firm provided the figure.
That's $89,670 per unit on average, Thurston reported.
Bakersfield apartment buildings are essentially full, thanks in large part to a strong local economy that has drawn in workers. With relatively steady rent prices and very little new product on the market, Bakersfield is attracting outside investors who simply can't find similar financial returns anywhere else in the state.
In the high-priced real estate markets of Southern California and the Bay Area, apartment purchase prices are so high that investors can only hope their value goes up over time. But they can expect even better in Bakersfield.
Purchase prices for apartments and four-plexes in Bakersfield and other parts of the Central Valley remain low enough that buyers can make money just on cash flow from rents. They can cover their mortgage payments with rental income and still have money left over every month.
"The Central Valley is the last place you can get cash flow" in California, Thurston said.
Slowly rising rents
Rent prices haven't gone up nearly as fast as purchase prices have. In fact, according to online apartment-information service Abodo, the median rental price for a one-bedroom unit in Bakersfield actually dropped 6.1 percent to $666 between December and January.
Generally, though, the rental-price trend is upward. According to Abodo, the average monthly rent increase for a single-bedroom apartment in Bakersfield was half of 1 percent. It said 2018's average monthly rent increase for a two-bedroom apartment in the city was even less: 0.37 percent.
Thurston said the local apartment market has been strengthening for about the last five years, adding that prices are still about 15 percent below their peak in 2008.
Single-family home effects
One reason for the improvement in market conditions, he said, is that investors picked up single-family homes at good prices during recession. After initially renting them out, many opted to sell once the rising market produced a healthy amount of equity.
Thurston said that sales trend ultimately took properties that had been competing with apartments off the market.
"We're certainly not seeing the head-to-head competition that we were," he said.