Driven largely by unemployment and lower incomes, apartment rents in Santa Clara County tumbled 11.5 percent in the fourth quarter compared with a year earlier, reaching their lowest level in three years.

The average monthly rent countywide for all types of units in large complexes — from studios to three-bedroom townhouses — fell to $1,482 in the fourth quarter, down 3.5 percent from $1,536 in the third quarter, according to a report released today from RealFacts, a Marin County company that tracks rents and occupancy rates in apartment complexes of at least 50 units. At the end of 2008, average rent in Santa Clara County was $1,675.

The last time rents were lower was in the fourth quarter of


2006, when the average rent was $1,481, just a dollar short of the most recent figure.

In Santa Clara County, the report covers 426 complexes, for a total of more than 78,000 units.

In San Mateo County, average monthly rent in the fourth quarter was $1,628, down slightly from $1,650 in the July-to-September period. But rents in that county fell 8.1 percent compared with the fourth quarter of 2008. The last time rents were lower was in the first quarter of 2007, at $1,624.

"Two conditions are affecting the market: One is unemployment, and the other is the decrease in household income," said RealFacts owner Sarah Bridge. With the decline in high-paying technology jobs in the past year, rents fell in bigger, newer apartment complexes, but occupancy levels remained relatively healthy, she said.

"It wasn't that there wasn't a demand for the product," but renters thought, —‰'Hey, we can't pay these top-of-the-market prices,' " she said.

Large complexes in Santa Clara County were 94.7 percent occupied last quarter, up slightly from 94.5 percent in the third quarter and down slightly from 94.8 percent at the end of 2008. The recent peak for occupancy was in the first quarter of 2008, at 96.5 percent. Bridge said landlords typically feel they can raise rents when their units are at least 95 percent full.

A wide spectrum of local landlords dropped rents last year in response to weakening demand, said Joshua Howard, executive director of the California Apartment Association/Tri-County division, whose members include big and small landlords in Santa Clara, San Mateo and Santa Cruz counties. In addition to high unemployment, more single-family homes and condominiums were being rented out last year, he said. Plus, "Some renters who have lost their jobs or taken salary reductions have decided to double up. All of this is affecting occupancy rates and rents in Silicon Valley."

Renters who do have stable incomes may be helping to boost the occupancy levels in those big complexes, he said. As rents there have dropped, more people can afford them and can ditch their old rentals in favor of something fancier.

Zubin Sadeghzadeh, a recent graduate of the University of California-Santa Cruz who works in marketing for a Milpitas company, has been living with family in Almaden Valley while looking for a place to rent in San Jose. He's noticed the decline in rents — a complex he lived in in late 2008 is charging $450 less now, he said. But there are very few studios or one-bedrooms in high-quality buildings that he can afford on his entry-level salary, he said.

"There's deals to be had if you can afford it, but someone in my position, who doesn't have the disposable income to put toward it, I'm basically looking at rooms" to rent in shared housing, he said.

As Sadeghzadeh has found, San Jose is still an expensive place to find housing. Despite falling 11.5 percent from the fourth quarter of 2008, average rent in the San Jose metro area — which includes Santa Clara and San Benito counties — was still third highest in the Western states, the RealFacts report showed.

The Los Angeles/Long Beach/Santa Ana metro area was most expensive at $1,520 average rent, followed by San Francisco/Oakland/Fremont at $1,502. (San Mateo County is part of the San Francisco metro area statistics.)

The steepest quarterly declines in rents in the West came in the Phoenix and Las Vegas metro areas. Average rent fell 8.7 percent between the third and fourth quarters in Phoenix, to $695, and dropped 8.2 percent in the Las Vegas area to $768.

Contact Sue McAllister at 408-920-5833.