Despite Tight Rental Market, Rates Hold Steady
With the exception of the Inland Empire, a tight market for apartments didn’t translate into significantly higher rents for most Southland landlords in the fourth quarter, a real estate data firm reported Wednesday.
Occupancy levels for large apartment complexes in Los Angeles and Orange counties were among the strongest in the nation, averaging 95% and above, according to Novato, Calif.-based RealFacts, which surveys rents at complexes with 100 or more units. But in the fourth quarter, the average monthly rent in Los Angeles rose less than 1% over the previous quarter to $1,346. Rents in Orange County also were almost unchanged at $1,273.
The Inland Empire posted strong price hikes as renters fleeing even higher prices in other Southern California communities kept demand high. Rents in the San Bernardino-Riverside area rose 1.4% in the fourth quarter -- and 6.4% for the full year -- to an average of $949. In L.A. and Orange counties, rents rose 3.9% and 3.3% for the year, respectively.
“Rents have gone up so much in Los Angeles, Orange and San Diego counties, people are casting around for a more affordable alternative,” RealFacts Chief Executive Caroline Latham said.
Another reason: Because Inland Empire rents are more affordable than other communities’, landlords have more leeway to raise rents.
The Inland Empire was one of only two markets in the western half of the U.S. -- Oklahoma City was the other -- to show significant growth in rents during the fourth quarter, according to RealFacts. Even there, the report found, the pace of rent growth has slowed as more renters have become homeowners.
Los Angeles rents are still below those in San Francisco, where the average monthly rent was $1,544 in the fourth quarter. But they are holding steady, while apartment rents in San Francisco, Oakland and Silicon Valley are dropping.
Southern California, Latham said, “is really the only place in the country that you can point to and say it remains a more or less healthy market.”
Although a weakened economy and record housing sales have taken some steam out of the market in the last year, occupancy and rents remain high.
The only difference from past years is in what’s moving. After more than two years of a sluggish economy, more-affordable areas such as Mid-Wilshire, Hollywood and Echo Park are seeing the greatest demand. And larger apartments aren’t moving as quickly as smaller, less expensive ones.
Mark Verge, owner of Westside Rentals.com, said he was telling landlords to cut rents, rather than invest in upgrades such as hardwood floors.
“Price is now the motivating factor,” Verge said.
For example, a one-bedroom apartment his company recently listed in Santa Monica for $950 a month brought in 150 calls and 45 applications. Another one-bedroom in a similar location advertised for $1,150 brought in only 10 calls and two applications.
“High-end properties sit out there a bit longer,” said Steve Fleishmann, vice president of sales for R&E; Investments, which manages more than 100 properties in the Los Angeles area. And in many cases, he said, these units are renting for 10% to 20% less than they were a couple of years ago.
But economists believe that demand -- and rents -- for these and other rental properties will increase in the year ahead, assuming the job market improves, mortgage rates rise and housing prices continue to go up.
“As the cost of homeownership starts picking up, more potential buyers will be locked out of the market and will consequently rent,” said Esmael Adibi, director of the Anderson Center for Economic Research at Chapman University in Orange. “If you’re a renter, that’s not good news.”
