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.

Economic strength

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.

Cash-flow haven

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.

John Cox can be reached at 661-395-7404. Follow him on Twitter: @TheThirdGraf. Sign up at Bakersfield.com for free newsletters about local business.

(3) comments

Bayesian

"... the median rental price for a one-bedroom unit in Bakersfield actually dropped 6.1 percent to $666 between December and January."

I'd like to what rental rates were used to make this determination. Median is defined as the middle number in a given sequence of numbers, taken as the average of the two middle numbers when the sequence has an even number of numbers: 4 is the median of 1, 3, 4, 8, 9.My kids can't find anything like that to rent.

Django

Oildale, Rexland Acres, The East Side maybe? There is a $650 apt n 21st and D that seems to come up a few times a year. One Bedroom apts Downtown generally go from $800 up.

Django

As landlord greed takes over like it has in LA, San Diego, SF and coastal cities, Bakersfield will continue to see prices rise.

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